The natural resources mutual fund sector has a number of attractions, but one characteristic that is probably not immediately evident to many investors is that these funds do not correlate closely with broad stock indexes. This, it turns out, is a valuable feature.
As defined by Morningstar, natural resources funds "focus on commodity-based industries such as energy, chemicals, minerals and forest products in the U.S. or outside of the U.S. Some portfolios invest across this spectrum to offer broad natural resources exposure. Others concentrate heavily or even exclusively in specific industries, including energy or forest products." Unlike a commodities fund, which uses futures contracts, a natural resources fund purchases the shares of companies that are involved in the mining, refining, packaging or transporting of commodities.
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