ETF Talk

Metals are Not a Great Foundation for Your Portfolio

Modern life is dependent on industrial metals. If you are interested in making an investment that gives you exposure to public companies that provide base metals for a host of uses, consider the PowerShares DB Base Metals Fund (DBB).

DBB is an exchange-traded fund (ETF) that offers a way to tap into the prospects of several key metals. For example, aluminum is important for everything from transport to beverage containers, since it is light, rust-resistant and highly conductive. Zinc is added to iron and steel as a galvanizing agent, thereby making those metals rust-resistant. Zinc also is an additive in a wide range of products, from paint to plastics. Copper is vitally important to the electronics industry, appearing in circuit boards and power lines. That shiny metal also has uses in building, machinery and consumer products, among others.

DBB attempts to replicate, before fees and expenses, the performance of a rules-based index composed of futures contracts in aluminum, zinc and copper. However, this is a highly volatile and non-diversified fund, so it carries additional risk compared to many investment alternatives.

Read more about where metals are headed in the year ahead at Eagle Daily Investor.

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