Commodities ETFs: Good Diversification Tool

The popularity of commodity-based ETFs is on the rise. But before you rush out to buy, please remember that commodities are volatile, even during the best of times.

Also note that most of the commodity ETFs are not old enough to accurately gauge their performance. Jesse Emspak of Investor's Business Daily reports that a lot of the new ETFs had to do with the hot oil market, which has cooled in the recent months.

Many believe the commodity ETFs are useful for a long-term investment and diversification - some will track a broad basket of commodities rather than just one. It's also important to remember commodities don't really track the market so they have zero correlation.

As with any other investment opportunity, do the research and make sure it fits with your goals and in your portfolio. There are always risks and rewards to weigh before making the decision.

Speaking of commodities, a short-lived rally took copper up early Friday morning, but the metal closed unchanged, leaving the copper-holding ETFs slightly lower. The PowerShares DB Base Metals (DBB), which tracks other metals along with copper, slipped 0.6%.

Sales of existing homes surprisingly rose, and Simon Constable of TheStreet.com reports the U.S. housing market has been a key demand area for copper. But new markets for the metal are popping up, such as in manufacturing of window air conditioner units needed in China. It's the metal of choice for cooling equipment.