Inflation and the Omicron variant are the main concerns heading into 2022, making real assets even more important for a balanced portfolio.
Rising inflation concerns continue to swirl in the capital markets, making real asset exposure a must as prices for raw goods continue to climb.
“Regarding global real assets, the ongoing economic recovery should support increased commodity demand and higher prices,” a Seeking Alpha article notes. “Real estate investment trusts should keep pace with equity prices, but rising interest rates should prevent REITs from outperforming equities, the report said.”
While the economy continues to recover despite a recent uptick in COVID cases, the pandemic still poses a concern to investors.
“The economy continues to perform well as we see jobs coming back, companies are profitable, new businesses are opening, and stock prices remain at strong levels,” said Darrell Cronk, chief investment officer of Wells Fargo Wealth & Investment Management. “But looking at next year, we have a new virus variant to consider and economic growth should be slower. We also expect inflation to remain above its long-term average but to retreat somewhat as supply shortages ease.”
Multiple Real Assets in One ETF
To capture the trends in 2022, investors don’t have to hold multiple assets in order to get that imperative real asset exposure. That can be obtained via one exchange traded fund (ETF): the FlexShares Real Assets Allocation Index Fund (ASET).
As far as what real assets to hold, ASET removes all the guesswork — as opposed to holding multiple assets like precious metals or commodities like oil, ASET can give investors exposure to it all through one position. Additionally, volatility is minimized due to ASET holding companies that represent real asset exposure instead of the actual tangible assets themselves.
ASET seeks investment results that correspond generally to the price and yield performance of the Northern Trust Real Assets Allocation IndexSM. The underlying index measures the performance of an optimized allocation to the underlying funds that is intended to provide exposure to certain real assets and minimize the overall volatility of an investment in the underlying funds.
As of December 17, the top three sector allocations included real estate (32%), industrials (17%), and utilities (14%). Moreover, ASET takes a global approach by investing in countries outside of the United States as well, including Canada, the United Kingdom, and Japan.
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