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Including Natural Gas ETF funds in your Portfolio
There are a number of reasons you could consider adding natural gas ETF funds to your portfolio. In this article it will be mentioned how it can give you exposure to energy companies and commodities, and how it can act as a hedge against inflation and other energy investments.
Exposure to Energy Companies and Commodities
Every time you make a trade you pay a commission, trying to minimize this expense is an obvious goal. Another obvious goal is to minimize risk.
Let’s assume you are convinced that the value of energy companies, in general, will rise. Buying stocks in a ton of companies will result in a lot of commissions. At the same time, buying only stocks in one, or a few, companies will significantly increase the risk of your investment. This is where a natural gas ETF comes in handy, with one fell swoop you can gain exposure to a large number of energy companies, saving you commissions and reducing risk.
Similarly, let’s say you are of the opinion that the value of natural gas as a commodity will increase. You could attempt to gain exposure on your own, for example by trading in futures contracts or buying stocks in natural gas companies, this would be complicated business, however. A compelling solution would be natural gas ETFs. One trade, and you have experts tracking the price of natural gas for you!
Using Natural Gas ETF funds as a Hedge
Natural gas ETF funds can be used as a hedge in a number of ways. If you have build up a portfolio with a significant investment in the energy sector, you could consider hedging some of the risk with short natural gas ETF funds. A short ETF will track the opposite of the standard ETF, thus if the value of your general energy investments fall, the value of your short energy ETF will increase.
Energy, as a commodity, has seen growth in the last 50 years, even in times of crisis, and seems to have an inverse relationship with the dollar, thus natural gas etf funds might work well as a hedge against economic crisis and inflation.
There are additional reasons you could consider investing in natural gas etf funds. In general, they have the potential to save you a lot of risk and a lot of commission. Two very worthy goals!