Commodity index ETF offers diversification tool - MarketWatch: "Here's the scoop:
The DBC looks and acts like an ETF, but its structure more closely resembles that of a commodity pool. This is the first ETF-like product offered on a U.S. stock exchange providing direct exposure to a diverse basket of commodities. Like an ETF and unlike your typical mutual fund, the DBC's share price is updated intraday and the shares can be traded throughout the day.
The fund and the underlying index it closely tracks (the Deutsche Bank Liquid Commodity Index) focuses on six key global commodities with liquid derivatives and futures contracts with the following weightings: Light sweet crude 35%, heating oil 20%, gold 10%, aluminum 12.5%, corn 11.25% and wheat 11.25%. It will be rebalanced back to these levels each November.
As I mentioned earlier, the DBC is a new way to play oil and energy, with its 55% concentration in crude and heating oil, but I believe this fund, with its exposure to a basket of global commodities, is even more valuable as a diversifying component of an investment portfolio.
The real value of this fund is how it can diversify the typical investment portfolio, which is concentrated in U.S. equities and bonds. Global commodities have one of the lowest correlations to U.S. equities or bonds -- and including commodities in a typical portfolio is a smart way to reduce the portfolio's volatility and increase its risk-adjusted returns. Plus, the six commodities within the fund are lowly-correlated with each other, which should serve to reduce the volatility of the DBC itself.
The energy futures are rolled monthly, the others annually. Deutsche has structured it this way to potentially capture additional g"