How to Invest in Commodities Funds

Standard & Poor's Web site also offers insight into the broad-base long-short S&P Commodity Trends Indicator index and provides an overview of the gauge, a fact sheet and a methodology paper that explains it in more depth.

TheStreet.com: Why should an investor consider your fund as part of an investment program?

One of the main reasons that an investor should consider the Direxion CTSF as a part of their investment program is that it allows them to diversify their portfolio with non-correlating assets. The S&P CTI has typically maintained a near zero correlation to stocks and bonds, as measured by the S&P 500 index and the Lehman Brothers Aggregate Bond index. This diversification should help during periods of uncertainty in the markets.

Additionally, the long/short nature of the S&P CTI allows the Direxion CTSF to capitalize on both positive and negative trends in various commodities. This long/short approach also tends to make the fund less volatile than other commodity alternatives.

TheStreet.com: How does the S&P CTI determine if and when to either long or short a commodity? What are the parameters? How often does the index re-adjust?

The long/short decisions are made by monitoring the price of the sectors in relation to their respective seven-month moving average price. The long/short decisions are implemented at the sector level on a monthly basis. The exception is the energy sector which, due to geopolitical issues, economic changes and other factors uniquely related to the sector, is positioned either long or neutral (flat). If energy is positioned flat, its weightings are allocated proportionately across the other five sectors.