Oil & Commodities

Oil Returns vs S&P

34.40%

Versus S&P

-20.20%

3 days ago

34.40%

Versus S&P

-20.20%

3 days ago

6m High

6m Low

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Crude Oil

$21.10

$13.70

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S&P 500

4,796.56

3,666.77

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Crude Oil

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S&P 500

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Does not follow the stock market

Sources: Invesco DB Oil Fund, SPX

    Reasons to Invest

  • Helps diversify your portfolio
  • Can offer inflation protection
  • Has the potential to outperform other asset classes
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Highlights

Good For

Hedge inflation + add diversification

Time Horizon

Varies from short-term to long-term depending on how you invest

Earnings from

Price appreciation + value appreciation + futures profits

Diversification

Environmentally Friendly

Commodities market prices have a high negative correlation with the stock market, as documented over the past 140 years. It's been noted that the two markets tend to alternate in price leadership in cycles spanning 29 to 32 years. However, commodity prices generally do not track a long-term upward trajectory like, say, the S&P 500 does. Over a nearly 50-year period from 1970 to early 2021, commodity prices rose only a bit and saw dramatic spikes and drops throughout that time.

High volatility but the potential for substantial returns

avg

-2.0%

Avg Annual Returns

Past 10 years

Ways to Invest

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Want to keep it traditional?

Check out Commodities in the stock market

Compare Commodities Returns

Risk Score

6M Growth

Oil

DBO

26

+34.35%

Gold

IAU

13

+0.83%

Risk Analysis

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Risk Analysis

As of 07/04/2022

Low

Compared to

S&P 500
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Crude Oil

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S&P 500

Low

Commodities are highly volatile, and investing in them is generally best left to sophisticated investors who can stomach a high level of risk. If you are able to handle the high volatility, however, there is the potential to earn strong returns. Still, it's wise to only put a portion of your portfolio in commodities.

Performance During a Recession

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Performance During a Recession

The prices of commodities generally do tend to drop as economic activity slows during a recession. However, certain commodities like gold, for example, are viewed as a safe haven during market crises and tend to increase in value. In general, commodities are lowly or negatively correlated with traditional assets like stocks and bonds, and they do tend to provide protection against inflation. 

Performance by Category

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Performance by Category

Drawbacks

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    Drawbacks

  • Potential for extreme volatility
  • Exposure to foreign and emerging markets, which can further increase risk
  • Can involve futures contracts, adding speculative risk
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Projections

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Projections

Monthly contribution

$

Compared to

Bond

Total Invested

Potential High

Potential Low

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Oil & Commodities

$0

$00%

$00%

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Bond

$0

$00%

$00%

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Oil & Commodities

Potential High

$00%

Potential Low

$00%

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Bond

Potential High

$00%

Potential Low

$00%

Compare Asset Classes

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Compare Asset Classes

How You’re Taxed

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How You’re Taxed

Income Tax

Income Tax

Capital Gains

Capital Gains

How you're taxed on commodities depends on how you invest in them. Commodity ETFs have special tax rules, with the exact impacts depending on the legal structure of the ETF and whether it's a futures-contracts or physical commodity ETF. You can expect to receive a Schedule K-1 or a Form 1099 from the ETF issuer each year detailing your tax reporting obligations. Meanwhile, gold and other precious metals are categorized by the IRS as collectibles, which are taxed at the long-term capital gains tax rate of 28% when held for over a year. This includes precious metals ETFs.

Did You Know?

  • poitStar

    Commodity prices tend to move together through what are called 'super cycles,' which are bull or bear market periods that tend to last 15 to 20 years.

  • poitStar

    In 2021, the S&P GSCI (a benchmark for commodities investing) outperformed the S&P 500 for the first time in a decade, surging 35% compared to the S&P 500's 23%.

  • poitStar

    Coffee had a standout performance among commodities in 2021, surging 84%, while crude oil rose 40% and copper increased by 21%.

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