Part 5: Investing in Commodities — Gold, Silver, and Beyond Through ETFs
You've built your portfolio.
You've achieved basic diversification.
At this stage, some people begin to ask questions such as: should I own gold, silver, or oil?
These assets are known as commodities, and there are ways to gain exposure to them through investment products available via nsave’s investment feature.
Why Commodities Are Different
Stocks represent ownership in companies that aim to generate profit.
Bonds represent loans that pay interest.
Commodities are physical goods such as gold, oil, wheat, and copper.
Commodities do not produce cash flow and do not pay dividends.
They are often discussed in investing education for their potential role in diversification and as a possible hedge during certain economic conditions.
Historically, commodities have sometimes behaved differently from stocks and bonds. This difference in behaviour is why they are often considered as a small component of a broader portfolio. This does not guarantee protection against losses.
The Key Rule: Only ETFs, No Options
There are multiple ways people gain exposure to commodities, each with different characteristics and risks.
Some approaches involve:
- Physical ownership, which introduces storage, insurance, and resale considerations
- Futures contracts, which are complex and can involve leverage
- Options, which carry a high risk of loss
Another commonly discussed approach is using commodity ETFs.
Commodity ETFs provide exposure to a commodity’s price through a regulated investment vehicle. Like other ETFs, they are traded on exchanges and can be accessed without handling the physical asset directly.
Example: Gold ETFs
Some ETFs are designed to track the price of gold by holding physical gold on behalf of investors. For example, a gold ETF holds gold in secure storage and issues shares that represent fractional exposure to that gold.
Buying $100 of such an ETF provides exposure to gold’s price movements without requiring physical storage or insurance. Selling involves placing a sell order, subject to market conditions and settlement timelines.
Gold: Historical Context
Gold has been used as a store of value for thousands of years. Historically, during periods of currency depreciation or economic uncertainty, gold has sometimes maintained value relative to certain currencies. This behaviour is not consistent and is not guaranteed.
For individuals earning in one currency and living in another, gold is sometimes discussed as one of several tools that may reduce reliance on a single currency. Educational materials often reference illustrative allocations such as 5–10% of a portfolio for gold exposure. These figures are examples only and may not be appropriate for everyone.
How to own it on nsave: Search "GLD" in the invest section. Buy your amount.
$0 commission. $0 minimum. You own gold without any of the hassle.
Silver: Higher Volatility
Silver shares some characteristics with gold but tends to experience larger price fluctuations. It has both industrial uses and store-of-value demand, which can result in higher volatility compared to gold.
Because of this, educational examples often reference smaller illustrative allocations, such as 2–5%. This is not a recommendation and outcomes can vary significantly.
Oil and Energy: Cyclical Exposure
Oil behaves differently from precious metals. Its price is influenced by supply and demand, geopolitical events, economic cycles, and energy transition trends.
During periods of economic growth, oil demand may increase, while downturns can reduce demand. This cyclicality makes oil exposure more volatile. Some investing discussions note correlations between commodity prices and certain economies. Exposure to oil is sometimes described as one way to reflect that relationship, though it carries additional risk.
Energy exposure can be gained either through oil-tracking ETFs or through ETFs that hold energy companies rather than the commodity itself.
Important Context: Commodities Don't Replace Core Holdings
Commodities are generally discussed as a complement to, not a replacement for, diversified stock and bond exposure.
Historically, equities have outperformed commodities over long periods, though past performance does not predict future results. A portfolio heavily concentrated in commodities may grow differently from one diversified across stocks, bonds, and other assets.
In most educational frameworks, commodities are presented as a smaller component intended to diversify, not replace, core holdings.
This content is provided for informational and educational purposes only and does not constitute financial advice. Investments involve risk, including the potential loss of capital, and past performance is not indicative of future results. Any examples or data are for illustrative purposes only. Before making any investment decisions, consult a licensed or qualified financial advisor who can assess your individual financial circumstances and objectives.
