What are the Natural Resources Mutual Funds?
In principle, the Natural Resources Mutual Funds are those funds which invests the investors' money in the stocks of companies principally engaged in the discovery, development, production, or distribution of natural resources. Natural Resources are again classified as 2 types: Renewable & Non-Renewable.
Natural resource are natural capital converted to commodity inputs to infrastructural capital processes.[1][2] They include soil, timber, oil,minerals, and other goods taken more or less from the Earth. Both extraction of the basic resource and refining it into a purer, directly usable form, (e.g., metals, refined oils) are generally considered natural-resource activities, even though the latter may not necessarily occur near the former.
Are all natural resource mutual funds good for investments?
One needs to be careful when investing in the so-called Natural Resources funds. Usually, these Natural Resources Mutual funds have heavy charges in the name of fund management and front sales charges. Expense ratio may also be huge (around 1.5%). This significantly reduces your return from the funds.
Then there is the problem of correlation. Most of the funds are invested heavily into the oil and gas companies, which mean that their portfolio is not widely diversified. Remember, natural resources also includes commodities like metals, and other stocks.
Are there any examples of Natural Resources Mutual funds available for investments?
Yes. Dreyfus Premier Natural Leaders (DNLAX), Franklin Natural Resources (FRNRX), Merrill Lynch Natural Resources (MDGRX), Morgan Stanley Natural Resource Dev (NREAX), Oppenheimer Real Asset (QRAAX), Pimco Commodity Real Return Fund (PCRAX) and Putnam Global Natural Resources (EBERX) are a few of the funds which are operating in the natural resources segment. But they may come heavy with the charges.
Are there any low cost Natural Resources Mutual funds available for investments?
An investor can opt for buying natural resource and commodity-oriented ETF or exchange-traded funds. These ETFs charge much lower fees than their managed fund counterparts and offer more diversity. Major Natural Resources ETF (Exchange Traded Funds) are:
DB Commodity Index Tracking Fund (DBC) Major Focus on - Futures contracts to track the Deutsche Bank Liquid Commodity index. Weightings are: crude oil (35%), heating oil (20%), gold (10%), aluminum (12.5%), corn (11.25%) and wheat (11.25%).
Energy Select Sector SPDR XLE Major Focus on - Oil company stocks.
iShares Dow Jones US Basic Materials IYM Major Focus on - Chemicals, base metals, mining forestry company stocks. (Not all commodities).
iShares Goldman Sachs Natural Resources IGE Major Focus on - Oil, oil services, base metals and mining company stocks.
iShares COMEX Gold Trust IAU Major Focus on - Gold.
iShares Dow Jones US Energy IYE Major Focus on - Oil company stocks.
iShares Dow Jones U.S. Oil & Gas Exploration & Production IEO Major Focus on - Oil exploration and oil company stocks.
iShares Dow Jones U.S. Oil Equipment & Services IEZ Major Focus on - Oil service company stocks.
Shares S&P Global Energy Sector IXCMajor Focus on - U.S. and foreign oil company stocks.
iShares MSCI Australia Index EWAMajor Focus on - Includes mining and natural resources company stocks.
Another option could be to buy stocks of natural resource and commodity companies directly. Examples of such companies inclide Alcoa (AA), Baker Hughes (BHI), Diamond Offshore Drilling (DO), Exxon Mobil (XOM), Phelps Dodge (PD), Inco (N), Falconbridge (FAL) and Weyerhaeuser (WY). Here you will have to pay the standard brokerage charges for stock trading which may be less than the Natural Resources Mutual funds charges.
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