Natural Resources ETF Is Plain Vanilla

A recent run-up in oil prices combined with uncertainty in the air has caused investors to grab for oil and gold ETFs. The evolution of ETFs has led to a set of very focused and concentrated products to meet these needs: Oil Services HOLDRs(OIH Quote), iShares Comex Gold Trust(GDX Quote), U.S. Oil(USO Quote) and U.S. Natural Gas(UNG Quote) to name a few.

Don't even get me started on the single commodity funds proffered by iPath -- an ETF just for cotton (iPath Dow Jones-AIG Cotton(BAL Quote))? Investors can still seek a well-rounded approach, however, to natural resources with iShares S&P North American Natural Resources(IGE Quote).

IGE is a good reminder of what attracted many investors to ETFs in the first place: cheaper alternatives to mutual funds. IGE tracks a range of natural resource companies rather than a single commodity, offering investors access to this sector without the fees of mutual funds or the confusion of the futures market.

IGE tracks a basket of U.S.-traded natural resource companies ranging from oil and gas producers to metals and mining companies to energy equipment manufacturers. The top 10 components in IGE's basket currently include Exxon Mobil(XOM Quote), Barrick Gold(ABX Quote) and Suncor Energy(SU Quote).

The simplicity of IGE is its strongest suit. IGE contains 127 stocks and allocates a reasonable 8.32% of its portfolio to top component Exxon. Compare this balance to iShares' more focused Energy Sector ETF(IYE Quote) -- which allocates more than 25% of its portfolio to Exxon -- and the mix seems reasonable.

You won't see the volatility that comes with more "pure" oil or gold funds on both the upside and downside, but that's a good thing for many investors looking to allocate a small portion of their portfolio to natural resources.