John Stephensen, the author of The Little Book of Commodity Investing, notes that investors can get direct exposure to commodities through a few major investable indices. All of these indices track the performance of exchange-traded futures contracts of a weighted basket of commodities. Since these indices track commodity futures, they are correlated with the price movement of underlying commodities but don’t track their spot prices perfectly. Due to differences in index methodology, the components and weights of commodities in the various indices are dramatically different.
Dow Jones-UBS Commodity Index
The DJ-UBSCI tracks futures contracts in 19 commodity markets, the weightings of which are based on the significance of the commodity in the global economy and market liquidity. Energy (33%) and Agriculture (30.2%) make up the bulk of the index. The index is rebalanced annually. More details on the index are available here.
Thomson Reuters / Jefferies CRB Index
This index tracks future contracts in 19 commodity markets that fall under five broad categories: energy, industrial metals, precious metals, agriculture and livestock. Energy (39%) and Agriculture (34%) make up the bulk of the index. The index is rebalanced monthly to the target weights of the components. You can find more about the index here.
Rogers International Commodity Index
RICI is designed by Jim Rogers, the well-known commodity bull, to track futures contracts in 37 commodities. The commodities that make up the index are selected for their role in worldwide consumption. Energy (42.8%) forms a significant portion of the index. The index is rebalanced monthly. You can find more about this index here.
S&P Goldman Sachs Commodity Index (GSCI)
The S&P GSCI tracks future contracts in 24 commodity markets but the index has a massive weighting in energy at 71.8%. According to Standard & Poors, the index is composed of commodities that have active, liquid futures markets and weighted based on world production. The index is rebalanced annually.
ETFs or ETNs based on all these indices are available.
