Pimco CommodityRealReturn Strategy (PCRDX) and T. Rowe Price New Era (PRNEX)

Pimco CommodityRealReturn Strategy is another Kiplinger 25 fund and it's discussed in a 05/05/08 article by Andrew Tanzer, "This Fund is on Fire". This fund tracks the Dow Jones-AIG Commodity index while at the same time it invests in Treasury Inflation-Protected Securities (i.e., TIPS).

Obviously, commodity prices have soared and so the results of this fund have been dramatic. In addition to pure performance, one of the advantages of a commodities/natural resources fund is that it tends to move independently from equities in general.

Nevertheless, I don't like this choice for the typical portfolio. While it tracks an index the index is heavily weighted on oil. This fund is likely to be very volatile. I think a better choice is the T. Rowe Price New Era (PRNEX) fund. This fund invests in companies that are involved with natural resources rather than investing directly in the commodities themselves. It has a great long term track record and allows you to get natural resources exposure without as much risk.