5 BEST COMMODITY ETFS TO BUY NOW
These commodity ETFs provide exposure to a broad basket of raw materials via futures contracts. But their relative complexity comes with higher fees.
By Tony Dong, MSC
Commodity prices often move based on escalating geopolitical tensions, as they did last spring in the wake of surgical strikes on Iran by Israel and supported by the United States.
More recently, investors have sought the perceived safety of hard assets amid increased uncertainty due to the U.S. government shutdown.
Besides speculative gains, commodities can also be useful for hedging inflation. But for most retail investors, buying physical commodities outside gold and silver directly (which you can do at Costco) isn't realistic. It's not like you can store barrels of oil or bushels of wheat in your garage.
While investing in commodity‑producing companies such as agriculture, mining or energy stocks might offer partial exposure, they're not perfect substitutes; stock prices also reflect company‑specific risks including debt, management quality and operating costs.
To get around this, many investors turn to commodity exchange‑traded funds (ETFs), which trade publicly and offer diversified exposure to commodity markets. But these funds don't usually hold physical commodities. Instead, they typically invest in futures contracts.
As you'll see, choosing the best commodity ETF isn't as simple as picking the one with your favorite raw material in the name. You'll need to take a close look at how each fund gets its exposure and be prepared to navigate some hidden tax traps along the way.
HARBOR COMMODITY ALL‑WEATHER STRATEGY ETF
- Assets under management:
$785.3 million - Expenses: 0.68%
- 30-day median bid-ask spread: 0.08%
The Harbor Commodity All‑Weather Strategy ETF (HGER) tracks the Quantix Commodity Index. While not actively managed, the index uses a more sophisticated, rules‑based quantitative approach that aims to systematize commodity trading strategies.
HGER trades 24 of the most liquid commodity futures contracts listed on U.S. or U.K. exchanges.
The strategy emphasizes inflation sensitivity by targeting commodities with high pass‑through costs and strong correlation to the Consumer Price Index (CPI). It also considers such factors as scarcity and currency debasement.
Structured as a 1940 Act fund, HGER does not issue a K‑1 and instead provides a 1099, making it easier to manage at tax time.
THE INS AND OUTS OF COMMODITY ETFS
Outside of precious metals, such gold and silver ETFs, most commodity funds don't own physical commodities. Rather, they gain exposure through futures contracts.
A futures contract is a derivative that obligates the buyer to purchase (and the seller to deliver) a specific amount of a commodity at a set price on a future date. The ETF is therefore holding contracts that reflect bets on future commodity prices.
For example, an ETF designed to track the price of West Texas Intermediate (WTI) crude oil doesn't buy and store barrels of oil. Instead, this fund might buy WTI crude oil futures contracts.
That's a key point. When you buy a commodity ETF, you're not getting direct exposure to the current (spot) price of the commodity. You're getting exposure to the price of a specific futures contract or basket of different ones, depending on the fund.
For instance, the spot price of oil might be $65 per barrel in June, but the ETF could be holding July contracts, which might trade higher or lower. While futures and spot prices are generally correlated, they're not identical and don't always move in lockstep.
This leads to another critical concept: contango. Futures contracts for commodities trade along what's known as a futures curve, a plot showing prices for delivery in various future months.
In a contango market, futures prices are higher than the current spot price, a common condition for many commodities, especially oil.
Here's why that matters: Futures contracts expire. When July comes around, our hypothetical crude oil ETF can't hold the July contract anymore. It must roll the position by selling the expiring July futures and buying a one dated later, say August.
But when the futures curve for oil is in contango, August contracts are more expensive than July. That means the ETF sells low and buys high, locking in a small loss each time it rolls.
This repeated cycle creates what's called negative roll yield, which is a performance drag over time.
For long‑term investors, this can mean that even if spot prices rise over time, your ETF's return might be much lower or even negative due to the cost of rolling futures in a contango environment.
There's one more wrinkle: taxes. Some commodity ETFs are structured as commodity pools, which means they issue a Schedule K‑1 tax form (PDF).
This is more complex than the standard 1099 tax form and can delay filing, especially for investors with multiple K‑1s. The K‑1 form also introduces complications such as potential state‑level tax obligations and more detailed reporting requirements.
The bottom line: Commodity ETFs can be useful for short‑term tactical exposure, but between futures‑based tracking, roll costs and tax complexity, they're not always investor‑friendly for long‑term buy‑and‑hold portfolios.
HOW WE CHOSE THE BEST COMMODITY ETFS
We began by screening out the riskiest corners of the commodity ETF space. That meant excluding funds that use leverage or inverse exposure, as well as those that concentrate on a single commodity such as oil, gold or natural gas.
Commodities are already volatile, so most investors, unless they're active traders, are better off with long‑only ETFs that hold a diversified basket spanning energy, metals and agriculture.
Next, we filtered for tax simplicity. Specifically, we only included ETFs structured to avoid issuing a Schedule K‑1 form.
Some of these are clearly labeled "No K‑1" in the fund name, but for others, you must dig into the prospectus or tax documentation to confirm. Avoiding K‑1s makes tax reporting easier and helps sidestep delays and state‑level complications.
From there, we applied a two‑part screen:
Liquidity: We prioritized ETFs with a reasonably low 30‑day median bid‑ask spreads to minimize trading costs.
Reputability: We looked for funds with sufficient assets under management (AUM), as a proxy for stability, scalability and investor trust.
For commodity ETFs, expense ratios weren't as big a concern. Complexity in this space naturally drives costs higher, and most offerings are far more expensive than passive equity or bond ETFs.
But while there's less basis for comparison, it's still worth shopping around and taking note.
HGER AVERAGE ANNUAL RETURNS AS OF 12/31/25
The Harbor Commodity All‑Weather Strategy ETF (HGER) gross expense ratio is 0.68%
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate and when redeemed may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end at harborcapital.com or by calling 800-422-1050.
IMPORTANT INFORMATION
Risks
Investing involves risk, principal loss is possible. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value.
Shares are bought and sold at market price not net asset value (NAV). Market price returns are based upon the closing composite market price and do not represent the returns you would receive if you traded shares at other times.
HGER:
There is no guarantee that the investment objective of the Fund will be achieved. Stock markets are volatile and equity values can decline significantly in response to adverse issuer, political, regulatory, market and economic conditions. A non‑diversified Fund may invest a greater percentage of its assets in securities of a single issuer, and/or invest in a relatively small number of issuers, it is more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio.
Commodity Risk: The Fund has exposure to commodities through its and/or the Subsidiary’s investments in commodity‑linked derivative instruments. Authorized Participant Concentration/Trading Risk: Only authorized participants (“APs”) may engage in creation or redemption transactions directly with the Fund. Commodity‑Linked Derivatives Risk: The Fund’s investments in commodity‑linked derivative instruments (either directly or through the Subsidiary) and the tracking of an Index comprised of commodity futures may subject the Fund to significantly greater volatility than investments in traditional securities.
Benchmarks
The Bloomberg Commodity Index (“BCOM”) is designed to be a highly liquid and diversified benchmark for commodity investments via futures contracts.
The Quantix Commodity Index (“QCI”) is calculated on a total return basis, which combines the returns of the futures contracts with the returns on cash collateral invested in 13‑week U.S. Treasury Bills. The Quantix Commodity Index was developed by Quantix Commodities LP and is owned by Quantix Commodities Indices LLC. These indices are unmanaged and do not reflect fees and expenses and are not available for direct investment.
The Fund’s returns achieved during certain periods shown were unusual and an investor should not expect such performance to be sustained.
The views expressed herein are those of investment professionals at the time the comments were made. They may not be reflective of their current opinions, are subject to change without prior notice, should not be considered investment advice or a recommendation to purchase a particular security.
ETFs are subject to capital gains tax and taxation of dividend income. However, ETFs are structured in such a manner that taxes are generally minimized for the holder of the ETF. An ETF manager accommodates investment inflows and outflows by creating or redeeming “creation units,” which are baskets of assets. As a result, the investor usually is not exposed to capital gains on any individual security in the underlying portfolio. However, capital gains tax may be incurred by the investor after the ETF is sold.
Contango is a market characterized by assets being cheaper today on the spot market than at some future date using a futures contract.
Diversification does not assure a profit or protect against loss in a declining market. Alpha refers to excess returns earned on an investment
Negative Roll Yield refers to the situation in commodities futures trading where the price of higher dated contracts is higher than the spot price.
30 day median bid‑ask spread (as of October 2, 2025): An exchange‑traded fund’s (ETF’s) median bid‑ask spread, expressed as a percentage rounded to the nearest hundredth, is computed by identifying the ETF’s national best bid and national best offer as of the end of each 10‑second interval during each trading day of the last 30 calendar days; dividing the difference between each such bid and offer by the midpoint of the national best bid and national best offer; and identifying the median of those values.
The CPI, or Consumer Price Index, measures the monthly change in price for a figurative basket of goods and services.
Harbor Capital is not affiliated with Kiplinger.
Reprinted with permission of Kiplinger.com, September 2025. The opinions expressed in this reprint are intended to provide insight or education and are not intended as individual investment advice. We do not represent that this information is accurate and complete, and it should not be relied upon as such.