5 Best Commodity ETFs to Invest In

From Bits To Atoms

As the attention of markets has for years been focused on high-flying tech stocks, anything less “fancy” went by the wayside. This resulted in green technology, AI companies, and semiconductor products commanding very high valuations, carried by large growth expectations and constant innovation.

This is especially true for commodities, as there is very little visible innovation or technological breakthrough in the production of soybeans, iron ore, oil, or, rare metals.

This is now changing, from the bottom of the commodity indexes in 2020, even if we are very far from the last peak of the sector in 2007.

Source: Financial Times

As commodities and commodity-related stocks are catching up on other equities, it might be time for investors to consider asset rotation in this category.

Why Are Commodities Hot Again?

Economics Factors

There are many reasons for the recent bull market in commodities and a renewed interest by investors in them.

The first one is the durable return of inflation in the global economies. After decades of low inflation and declining rates, it seems that a combination of debt and political crises has made inflation come back higher for longer.

The second factor is a chronic under-investment in sufficient commodity production. As the sector was out of favor, it was starved of the capital it needed to grow production.

Meanwhile, the global population is still rising, and many formerly poor countries are developing quickly, rapidly growing their demand for all commodities: copper in air conditioners and EVs, more meat in the diet, more coal, gas & LNG to power the grid, more lithium and polysilicon for the green transition, more uranium for new nuclear power plants, etc.

Geopolitical Factors

To top all of these trends, rising geopolitical tensions have made the need to secure key commodity supplies a new policy focus.

This is the core reason for Trump’s enthusiasm about Ukraine’s and Greenland’s rare earth resources. Or for China to add 60 million barrels to its already massive oil strategic reserve and add cobalt, copper, nickel and lithium to its state mineral reserve.

After all, what do Canada, Greenland, Panama, and Ukraine really have in common?

One answer could be potential access to China-free supply chains for critical minerals, the resources underpinning everything from advanced weapons systems to green energy technologies.

Foreign Policy – Trump’s Chaotic Agenda Has a Critical Through Line

Overall, a more chaotic world is one where production can be suddenly disrupted, like the Russian gas supply to Europe, leading to the need for more stockpiling and money flowing into the sector for new projects.

Commodities Overview

The term commodities in investing is usually synonymous with natural resources. It can cover many different types of products, which can be grouped into a few categories.

Food Commodities

This covers corn, soybean, meat, wheat, etc. This is a sector often characterized by extreme volatility, as weather patterns can radically affect production from one year to another, resulting in shortage or surplus.

It is also a very politically sensitive sector, due to the voting power of farming communities in many countries, making tariffs, import controls, and subsidies an additional source of volatility.

Industrial Metals

This includes many common commodities like copper, iron, and aluminum, as well as more specialized ones like tungsten, titanium, rhodium, etc.

As a rule of thumb, these commodities are strongly affected by two factors: the overall global economic activity, and the demand by the industries requiring a specific resource.

They also tend to follow a long 10-15-year cycle of bull and bear markets, linked to the very long time it takes to get a new mine launched.

Energy Commodities

This used to mostly mean fossil fuels (coal, oil, gas), but today, it also includes low-carbon energy sources like uranium. These resources are generally entirely consumed when used, and any shortage could severely disrupt local economies, as illustrated by de-industrialization in Europe following the loss of cheap Russian gas.

They tend to follow the overall economic output and can be especially sensitive to geopolitical shocks, like in the 1970s stagflation, a geopolitical & economic situation not dissimilar to our current one.

For this sector in particular, you can also check our article “5 Best Energy ETFs to Invest In”.

Some will even consider polysilicon used in solar panels, lithium & cobalt in batteries, or rare earth elements used in wind turbines’ magnets as energy commodities. However, as these resources can be mostly recycled, they are the junction with industrial metals as well.

Precious Metals

This category is mostly represented by gold, with silver, palladium, and platinum also present, even if those “secondary precious metals” are often mostly used for their chemical properties for industrial applications.

Gold and other precious metals are mostly purchased and stored as insurance against monetary crises and inflation. They have experienced a resurgence in the past year, something we discussed in more detail in “Gold Shortages Trigger A Record Price Run”.

For this sector in particular, you can also check our articles “5 Best Gold ETFs to Invest In”, “Top 10 Gold Stocks To Invest In”, and “Newmont (NEM): A Golden Ticket To Hard Money”.

Commodities ETFs

The issue with investing in commodities is that it is highly vulnerable to disruption and political risks. Most mining and extractive activities are happening in less-than-ideal jurisdictions, making them vulnerable to expropriation, sudden changes in taxes, etc.

Even in developed countries, environmental permits and political changes can jeopardize commodity-related projects a decade in the making, as illustrated by the abrupt cancellation of the Keystone pipeline at the beginning of the Biden administration.

For this reason, while directly investing in commodity producers can be successful, many investors will prefer to invest in ETFs, which will diversify the risks among dozens of different companies, with often each company having its many different locations where it is active spreading out any risk linked to a country or project in particular.

Top 5 Commodities ETFs

1. VanEck Natural Resources ETF

This is a relatively energy-heavy ETF, with 31% of the holding in this category, and 39% in materials.

Source: VanEck

By far, the USA is the heavy part of the ETF, with 46.2% of the total, followed by “anglophone” nations like Canada (11.5%), Australia (9.2%), and the UK (7%).

It makes this ETF a good pick for American or North American investors mostly looking to invest in domestic companies and reduce geographical risks. However, with 5 of out 6 of the top holding being fossil fuels companies, this is an ETF that might not pass the environmental criterion of many investors.

2. iShares North American Natural Resources ETF

A focus on North American fossil fuels is even more present in this other top ETF, with fossil-fuel-related holdings, including coal, representing almost 75% of the whole ETF.

Source: iShare

It is entirely focused on North American companies, and represents by far the most “traditional” commodity ETF for American investors, with a strong presence of American oil & gas companies.

3. Cohen & Steers Natural Resources Active ETF

Investors looking for more diversification away from fossil fuel will be more interested in this smaller ETF. The focus of its holding is a balanced approach, with roughly 1/3 invested each on energy, agribusiness, and metal &mining.

Source: Cohen & Steers

Here too, the USA (46.5%) and Canada (14.9%) are taking the bulk of the investment. However, agribusinesses like Bunge, Nutrien, or Corteva, are alongside major oil companies, with their business ultimately more international, with cultivation and clients for seeds and fertilizers all over the world.

Mining giants like Anglo American and Glencore also bring more geographical diversification, as even if they are technically listed in North America, their mining assets are all over the world.

4. American Beacon GLG Natural Resources ETF

If the reason an investor invests in commodities is a concern about reindustrialization and metal demand, this ETF from American Beacon Funds will be a better match.

As much as 53.9% of the holdings are focused on materials, with a healthy mix of steel, gold, zinc, copper, lead, silver, germanium, etc.

Source: American Beacon

The 22.6% allocated to energy is much more focused on natural gas and LNG, with a lower carbon footprint than coal or oil.

5. iShares MSCI Global Metals & Mining Producers ETF

Going further into avoiding exposure to fossil fuel and focusing on minerals, this IShare ETF is entirely dedicated to the mining sector, avoiding fossil fuel and energy entirely and more linked to industrial sectors and the green transition.

Its top holding includes the world’s largest mining companies, involved in producing almost every possible metal, including BHP (BHP +0.06%), Rio Tinto (RIO -0.1%), Freeport McMoran (FCX -3.51%), Glencore , and Vale (VALE +0.15%)

Source: iShares

It should also be noted that this ETF has a lot more global exposure, with many if not most of the production of these companies located out of North America. Overall, the geographical exposure will here mostly follow geology, with Australia the largest holding (21.3%) and South America over-represented when it comes to the mine location, independent of the headquarters or listing location.

Strategic Options

Investors looking to invest in a commodity ETF must first ask themselves why they’re interested in the first place. Depending on the rest of their portfolio and the risk & opportunity they have identified, different ETFs will have different appeals.

If this is more of a flight to safety to avoid potentially too high valuation in tech stocks, then the best approach will likely be a focus on safe jurisdictions and a wide exposure to the sector, balancing metal, agricultural products, and energy.

If the reason is more to hedge potential risks of stagflation similar to the 1970s, then a stronger presence in energy might be welcome. However, as the energy sector in 2025 is very different from the 1970s, some balancing of fossil fuel-heavy commodity ETFs should be considered. A good starting point can be our related articles:

If the concern is more about geopolitics and supply disruption in case of a conflict between the West and any of the Eurasian powers (Russia, Iran, China), industrial metals are likely the right direction. Disruption of the fertilizer supply chain could also then be expected, something that investors in the “Top 10 Fertilizer Stocks” would benefit from as well.

Lastly, if the worries are mostly about inflation and monetary crises, commodities can help but are likely not going to be the prime beneficiary of the crisis. Instead, precious metals are likely to perform better and the “5 Best Gold ETFs to Invest In” article will likely be more relevant.

Conclusion

Financial markets have historically oscillated over very long-term cycles between financial & tech equities (bits) and heavy industries and commodities (atoms), in a “bits versus atoms” narrative.

After almost 2 decades of dominance of “bits”, it seems global instability is bringing back the “atoms” produced by mining, farming, and drilling into the investing spotlight.

This is, however, a complex sector, fraught with risks linked to foreign jurisdiction, regulatory environment, and a traditionally capital-intensive business model.

So, picking the right ETFs is likely a good way to diversify risks and stay exposed mostly to the largest and safest companies in the sector, with more geographical diversity likely to bring lower valuation but also higher risks.

Investors should also carefully analyze the holdings of each ETF, as “commodities” can sometimes be almost synonymous with oil& gas and sometimes represent a much more diversified approach to the sector as a whole.