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), iShares Comex Gold Trust ( GDX), U.S. Oil ( USO) and U.S. Natural Gas ( UNG) 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))? Investors can still seek a well-rounded approach, however, to natural resources with iShares S&P North American Natural Resources ( IGE).
Is IGE the cheapest fund? No -- IGE's 0.48% pays for a peace of mind, however, for investors looking to avoid the double concentration of a commodity fund with a huge bet on a top holding.
In the hurry to grab for increasingly exotic products, some of the simplistic beauty of ETFs has been lost. Plain vanilla ETFs offer investors transparent portfolios for a low cost. Funds like IGE help average investors allocate their funds to a volatile area of the market, such as natural resources, while dampening the risk through the nature of their construction. It is certain that the explosion of ETFs will continue to lead to more focused products and complex strategies, but investors should not forget products like IGE in the shuffle.