Mutual Funds Make a Pitch for Commodities

There’s gold in them thar funds. And copper and oil and lumber …

So goes a current marketing pitch from the mutual fund industry. With commodities prices soaring and Federal Reserve chairman Alan Greenspan concerned about inflation, some fund companies are urging people to protect themselves against higher prices by putting money into mutual funds that specialize in commodities.

Nothing new in that for investors who can tolerate a lot of volatility. There are dozens of gold and natural resources mutual funds that have been around for decades, most of which invest in stocks of gold mining firms, oil producers and timber companies. Gold funds in particular have been favorites of investors who are alarmed about the economic future and see such funds as the next best thing to owning the precious metal itself.

But several mutual fund companies say commodities these days aren’t just for the sky-is-falling crowd, and that precious metals, oil and paper deserve a place in the portfolio of any investor who sees inflation ahead. Further, more fund providers are introducing portfolios that invest not in the stocks of commodity-related companies, but in the hard assets themselves through various financial instruments that track commodity prices.