Not only can real assets complement a portfolio with diversification, but they can also provide an inflation hedge. Consider the FlexShares Real Assets Allocation Index Fund (ASET).
However, it’s not a simple task building a real asset portfolio given the number of options investors have at their disposal. Whether its precious metals or real estate, it can be a daunting task figuring out where to start.
“Building up a portfolio of real assets takes time, but creating that portfolio is only the start of the work,” a NuWire Investor article explained. “To maximize profits and to minimize risks with real asset portfolios takes careful management. As with all investments, the value of a real asset portfolio can go down as well as up, but there are some practical strategies you can use to boost your chances of creating a profitable portfolio.”
As such, 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 via ASET holding companies that represent real asset exposure versus 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 exposures to certain real assets and minimize the overall volatility of an investment in the underlying funds.
Minimizing Volatility with Real Assets
With the Covid-19 delta variant, inflation, and other market factors affecting equities, real assets can help minimize volatility. Having assets in a portfolio that are uncorrelated with the market can help mute some of the volatility equities have been experiencing of late.
“You can minimize the risks of market volatility and the impact of geopolitical events by having a diverse portfolio of real assets,” the NuWire Investor article said. “Diversity will ensure that, should an adverse event in some part of the world affect one of your assets, it will not seriously reduce the overall value of your portfolio. The risks of market volatility too can be spread. If, for example, the price of oil drops, it will not have such a significant impact on your portfolio if the price of gold or tea holds steady or increases.”
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