| Commodity ETFs (exchange traded funds) have | | | | |
| been around for long enough that investors | | | | Some analysts warn of the high risk of |
| are well aware of their presence now, but a | | | | natural gas exchange traded funds because |
| newcomer to the market is making some waves. | | | | they are so volatile and because of the |
| Natural gas ETFs have been on the market for | | | | chance that some companies might back out on |
| just over a year and have done pretty well so | | | | their contracts and there is no way to |
| far. In April, 2007, Victoria Bay Asset | | | | recover from this due to the lack of |
| Management introduced the first natural gas | | | | liquidity of natural gas futures. |
| exchange traded fund and in its first year | | | | |
| rose over 40%. Victoria Bay manages other | | | | Other experts can only see that natural gas |
| energy ETFs and has plans to introduce more | | | | EFTs will continue to grow, slowly but surely |
| in the near future. | | | | they say. This is because of the crazy |
| | | | weather conditions that seem to be unending. |
| Natural gas exchange traded funds are futures | | | | With extremely cold winters and excessively |
| commodities that track the price movements of | | | | hot summers, consumers are using up natural |
| natural gas and invest in future contracts. | | | | gas as quickly as it can be pumped in to run |
| Natural gas exchange traded funds can be | | | | their heaters and air conditioning. These |
| quite volatile since they are based on | | | | experts are the same who suggest buying a one |
| predictions, but volatility is not | | | | year contract to make sure that you hit both |
| necessarily a bad thing with natural gas ETFs | | | | seasons. |
| because the trends tend to go the opposite | | | | |
| way of crude oil and can positively offset | | | | For those of you who are still considering |
| the oil EFTs in your energy portfolio. | | | | natural gas ETFs, here are a few things to |
| | | | watch. Weather - extreme heat and cold |
| Natural gas ETFs are not protected by the | | | | during the seasons, as well as unusual heat |
| Investment Company Act of 1940 because they | | | | and cold in certain regions. Think about it, |
| are securities. Because of this some | | | | if you live in Seattle and are used to mild |
| investors don't feel safe with natural gas, | | | | 75 degree summers, when the temperature hits |
| but others seem to enjoy the fact that they | | | | 95 you will be cranking up the air, if you |
| can trade without these government | | | | have air that is. Many people in that region |
| impositions. | | | | don't even have air conditioners because they |
| | | | don't need it, but recently they had a heat |
| One downside to natural gas exchange traded | | | | wave and the retailers couldn't keep them in |
| funds is that the fund doesn't pay into | | | | stock. Another thing to watch is government. |
| federal taxes, nor do they plan to, and | | | | Congress is trying to pass an energy bill to |
| therefore any taxes from earnings or | | | | reduce greenhouse gas emissions and countries |
| deductions from losses from natural gas ETFs | | | | around the world are trying to figure out |
| will be the responsibility of the investor. | | | | what to do about global warming. Natural gas |
| There really is no upside to this except that | | | | burns cleaner than other energies and will |
| you get to keep your money and earn interest | | | | soon be in even greater demand. Looking for |
| on it until tax time, rather than the | | | | a new commodity ETF? The choice should be |
| management company earning your interest. | | | | simple. |