“All In One” Commodity ETF

Reader Jim had this to say regarding commodity ETfs:

I’ve been looking for an “all in one” commodity EFT. While researching I ran across an ETF symbol “LSC” that while not perfect might do the job. I was hoping to get your thoughts.

First, let’s look at a 1-year chart:

In case you are not familiar with LSC, Yahoo’s profile had this to say:

The investment seeks to replicate, net of expenses, the S&P; Commodity Trends Indicator Total Return Index. The index is a composite of 16 highly liquid commodity futures grouped into 6 sectors. It positions each of the sectors either long or short (except energy) based on its price behavior relative to its moving average.

LSC has been around for a little more than a year, so a trend line (red) can be applied as you can see in the graph above. The average volume has been over 92,000 shares a day which means, at the current price of 9.33, a trading value of over $850,000.

While the markets were open, I checked the bid/ask spread, which was 2 cents.

If your potential investment in this fund is fairly small, I don’t see a problem in getting in and out quickly. However, I don’t not like Jim’s “all in one” description as it may lead to the wrong conclusion that this fund can simply be bought and held.

As with all investments, you want to pick an appropriate entry point. To me, that moment in time occurs when the price (blue) rises above its long-term trend line (red). As soon as your order has been filled, you need to set up a trailing stop loss and track it daily.

I have no positions in this fund and neither have my clients.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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