Balanced Exposure to the Natural-Resources Sector
While this natural-resources ETF isn't for the faint of heart, it can offer good diversification benefits.
An investment in natural-resources commodities can offer good diversification benefits and a partial hedge against inflation (1). Because it is difficult to store most commodities (aside from precious metals), most commodity-oriented funds either invest in commodity futures or in the stock of companies whose businesses are tied to commodity prices. There is a trade-off between the two approaches. Commodity futures are more highly (though not perfectly) correlated with commodity prices than natural-resources stocks. But they introduce roll-yield risk, where some slippage could occur if an expiring contract has a lower price than the contract replacing it. And funds that invest in commodity futures tend to be more expensive and less tax-efficient than those that invest in natural-resources stocks. SPDR S&P Global Natural Resources ETF (GNR) is one of the better options in the latter group.
This index fund invests in the world's 90 largest stocks in the energy, agriculture, and metals and mining sectors. In order to better diversify the portfolio, the fund assigns equal weightings to each of the three sectors. This prevents it from tilting heavily toward energy stocks, which would receive larger representation in a market-cap-weighted portfolio. Its holdings' revenue and performance are tied to the prices of the commodities that they or their customers sell. Because these commodities are cost drivers for companies in many other industries, their prices have relatively low correlation with the broad stock market. However, the fund is more highly correlated with the market than funds that invest in commodity futures.
Alex Bryan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.