Gold the commodity most investors associate with the category — doesn’t currently appear at all in one broad commodities fund’s portfolio. Refined fuel contracts top the lineup instead.
Key Takeaways:
- Commodities rallied 24.4% in Q1 2026, and advisors are using them to diversify beyond stocks and bonds.
- Four broad commodities ETFs pick holdings differently, from equal weighting to active roll management.
- Most commodities ETFs now skip the K-1 tax form, and advisors typically allocate 5% to 15%.
Broad commodities ETFs spread bets across everything from crude oil to cocoa. The category drew fresh attention in 2026 as energy-driven price swings lifted the asset class. Advisors are increasingly using the funds to diversify beyond stocks and bonds, said John Love, president and CEO of USCF Investments.
The Bloomberg Commodity Total Return Index climbed 24.4% in the first quarter of 2026. Energy prices led the advance after the closure of the Strait of Hormuz. The closure stoked fears of a global supply crunch, according to first-quarter commentary on the Global X Commodity Strategy ETF (COMD).
All five commodity sectors, precious metals, energy, agriculture, livestock and industrial metals, gained during the quarter, the commentary added.
“There’s really a different risk and return profile in a single commodity versus a broad basket,” Love said. “With the broad basket, obviously you have diversification and some risk reduction.”
Love pointed to cocoa, which jumped 300% in 2024, as evidence that a broad basket can catch rallies that investors might otherwise miss.
Equities, meanwhile, are only modestly discounted. Morningstar’s Q3 2026 outlook found the U.S. stock market priced at an 8% discount to fair value. That’s not enough of a cushion to justify overweighting stocks, according to David Sekera, Morningstar’s chief U.S. market strategist.
Commodities have also held up when stocks and bonds moved together, Love said. He pointed to 2022, when the Bloomberg Commodity Index rose about 16% even as stocks and bonds both fell. He called it “a real great example of when commodities gave you that diversification.”
Commodities Strategies Take Different Paths
Each of these four ETFs picks its holdings differently. The USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI ) equally weights 14 of 27 eligible futures contracts each month. That’s a departure from indexes that weight commodities by production or trading volume, according to the fund’s fact sheet.
Traditional commodities benchmarks such as the S&P GSCI allocate about 70% to energy. That makes them move closely with oil-focused funds, according to Love. “We think each degree of freedom deserves an equal weight,” he said of SDCI’s approach. Every commodity deserves equal footing, he added, regardless of how often it makes headlines.
See more: Is Oil’s Peak Behind Us? Does It Matter for Midstream?
Refined fuel contracts, low-sulfur gasoil and ultra-low-sulfur diesel, led SDCI’s portfolio at just over 8% each as of July 15. Coffee ran close behind at 7.8%, while gold didn’t make the cut that month, according to the USCF.
The Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC ) takes an active approach instead. It selects futures contracts along the curve to limit roll costs, according to Invesco’s first-quarter fact sheet. PDBC’s net asset value climbed 29.97% year to date through March 31, edging its excess-return benchmark’s 28.32% gain, the fact sheet shows.
Two other funds track the Bloomberg Commodity Index Total Return more directly. The abrdn Bloomberg All Commodity Strategy K-1 Free ETF (BCI ) and the GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (COMB ) both returned about 24.2% in the first quarter, according to their fact sheets. COMB charges a 0.25% expense ratio, among the lowest in the category, per its fact sheet.
Commodities Funds Simplify Tax Paperwork
Each of those funds avoids the Schedule K-1 tax form that once kept some advisors away from commodities, Love noted. Investors complained about that paperwork often enough in commodity ETFs’ early days that issuers began building funds without it.
“You don’t see a lot of K-1 funds being launched unless that is the only way to get exposure to something,” he said.
A handful of funds still use the K-1 structure, according to ETF Database. They include the Invesco DB Commodity Index Tracking Fund (DBC ) and the iShares S&P GSCI Commodity-Indexed Trust (GSG ). Love said that a few newer funds, including some tied to crypto, still use K-1s because no other structure exists yet.
USCF runs at least one strategy in both K-1 and 1099 versions, structured differently under securities law, Love said. That lets investors pick whichever filing suits them. Some still prefer the K-1 version’s tax treatment even as the broader market shifts toward 1099 filing.
For advisors building a position, Love suggested 5% to 15%. That’s well above the 1% to 3% typical starting point when investors first add commodities exposure. Anything smaller doesn’t move the needle enough to capture the diversification benefit, he said. The right number depends on what else is in the portfolio, with fewer other diversifiers pointing toward the higher end.
For more news, information, and analysis, visit the Commodities Content Hub.
