Eureka!

Natural resource funds include hard assets from precious metals to iron, steel, copper and a host of other industrial metals, as well as energy, agricultural and other stocks that are commodities.

Charl Malan is one of the investment professionals managing the Van Eck Global Hard Assets Fund (GHAAX), which has been around since 1994. In March, 58 percent of the fund's assets were invested in energy stocks, with 15 percent in industrial metals and 11.5 percent in precious metals.

The fund's average annual total return was more than 32 percent for the past three years ending March 31. Portfolio managers invest either in the commodity itself or in the commodity equity, which is the company that makes the product. "That's a critical differentiating factor, because at times in the cycle, the commodity may offer better value than what the equities are offering," says Malan. "Then there are times [when] the equities are offering more value."

These funds are ideal for investors who want diversification and understand commodities and their risks. Pros suggest taking small nibbles in this arena.

This article was originally published in the July 2007 print edition of Entrepreneur with the headline: Eureka!.