CandleFocus

United States Natural Gas Fund (UNG)

Candlefocus Editor
UNG is a non-diversified ETF and has substantial risks, including those of the ETF’s underlying futures contract. Potential investors should understand the concept of contango, which affects ETFs such as UNG. Contango is a situation where the futures price of a commodity is higher than its spot price, and UNG’s investors bear the cost of this buying/selling difference. In November 2019, the fund had AUM of $1.4 Billion. Its expense ratio is 0.05%, which is one of the lowest in the industry. This boosts its attractiveness for long-term investors. UNG has its pros and cons, making it ideal for some investors, while others shy away from it. As of May 2021, the ETF has outperformed its underlying futures contract, making it attractive for investors who are optimistic on natural gas prices.

UNG is a potentially attractive investment vehicle given its low cost and ability to mirror the performance of the natural gas industry, but it also carries substantial risks and can be greatly impacted by events such as contango. For example, the fund’s performance has been hampered by the widening gap between the spot and futures prices of Henry Hub.

Additionally, investors should be aware that UNG is a commodity futures-based ETF, meaning it may be more suitable for long-term investors that are comfortable with futures contracts and sophisticated trading strategies.

That being said, the UNG fund has also seen perks in 2021, such as positive returns and an increase in AUM. This makes UNG a potential investment for risk-tolerant investors that are bullish on the energy industry.

For those investors that are looking to diversify their portfolio and capitalize on the natural gas sector, the United States Natural Gas Fund (UNG) is a potential option that should be thoroughly analyzed before investing.

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