Author Topic: Commodity ETFs/ETNs  (Read 1825 times)

Offline otowner98

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Commodity ETFs/ETNs
« on: November 08, 2009, 01:16:21 PM »
Does anyone here have any experience with any of the commodity ETFs or ETNs? 

There aren't a ton of them (<100), and most haven't been around longer than a couple of years, but I sure like the idea better than ddirectly playing in the futures markets (plus I don't really have the scratch to get serious about that). 

I'm leaning toward getting one of each of the following: a base metals, agricultural, and general commodity fund.  I just can't seem to find good data to pick between the 3 or 4 fund families.

Offline madcap1one

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Re: Commodity ETFs/ETNs
« Reply #1 on: November 08, 2009, 01:22:06 PM »
I am a former futures trader professionally, and now keep my eye on them, but mostly focus on currencies.

Drop me a PM, perhaps I can help you with getting your research moving along.

Offline Mr. Bill

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Re: Commodity ETFs/ETNs
« Reply #2 on: November 10, 2009, 05:32:44 PM »
I don't have madcap1one's experience, but I've invested a little in some commodity ETFs.

1) ETFs are "paper commodities": i.e., you own a share of an entity that invests in the commodities, or in futures contracts (one step further removed from reality).  ETNs, as I understand it, are even more "unreal".  I don't have a good link available, but you should research the difference between ETFs and ETNs before buying.

2) The tax issues may be confusing.  Many (most? all?) ETFs are partnerships.  You become a limited partner by buying shares, and you have to pay income tax annually on your fraction of the partnership's income (even if you haven't received any of it yet!).  It's not difficult to deal with this using something like TurboTax, but it does add to the annoyance.

3) The biggest ETFs are running up against CFTC limits on how much of the market they're allowed to control.  More info in this thread: US CFTC goes after evil commodity "speculators".

Hope this is helpful.

Offline madcap1one

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Re: Commodity ETFs/ETNs
« Reply #3 on: November 11, 2009, 10:04:58 AM »
Mr Bill as usual is straight on!

His knowledge of tax implications exceeds mine, simply because I run everything through my corporation as a liability shield. I know next to nothing about personal tax implications - and I did not stay at a Holiday Inn last night. I do however hope that my accountant did...


Offline Mr. Bill

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Re: Commodity ETFs/ETNs
« Reply #4 on: April 22, 2010, 08:12:17 AM »
Good article summarizing some of the tax issues with ETFs and ETNs:

Watch Out for Hidden Tax Traps Inside ETFs