A Commodity ETF to Help Diversify Your Portfolio

Under normal market conditions, SDCI invests 80% of its assets in futures contracts and other commodity-related instruments tracked by the SummerHaven Dynamic Commodity Index Total Return

This index reshuffles monthly, pulling 14 commodity futures from a broader pool of 27 eligible commodities. The sectors include precious metals, industrial metals, energy and agricultural products such as livestock, softs, and grains.

SDCI launched in 2018 and carries an expense ratio of 0.64%. According to YCharts, SDCI has delivered a 4.32% year-to-date return and a 12.30% return year-over-year. In comparison, the iShares GSCI Commodity Dynamic Roll Strategy ETF (COMT A+), has experienced a -3.67% return YTD and a -5.60% return year-over-year. 

Earlier this year, SDCI was also nominated for Commodity ETF of the Year by etf.com.

Adding commodities to your portfolio can enhance diversification. Because they offer low correlation with traditional assets such as stocks and bonds, they tend to perform well when equities are struggling. Also, as tangible assets, they can provide a sense of security during uncertain periods. 

Precious metals such as gold and silver may have helped buoy the index this year, offsetting drags from weaker performers like crude oil, natural gas and wheat. Gold is often referred to as a safe haven during times of market volatility. 

SDCI can also serve as an inflation hedge because commodities tend to do well in inflationary environments. As the prices of goods and services go up, the price of commodities also typically increases. 

While commodities can be volatile, they can also offer significant upside potential. The balance is part of what makes SDCI appealing to investors looking for an all-weather basket to adapt to market shifts.

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