A rising population will only add to the globalized need for natural resources. One mechanism for unlocking this growth is a thematic ETF from FlexShares.
The benefits of getting natural resources exposure is not isolated to just that growth component.
“There are several reasons why natural resources investments make a compelling opportunity now and in the future,” said Mark Carlson, senior investment strategist at FlexShares ETFs, in a U.S. News & World Report article. “First, it’s important to note the demand for natural resources is expected to increase due to growing populations and rising per capita income in global markets. Having exposure to natural resources provides an opportunity for investors to capitalize on rising natural resource input prices because of this demand.”
With consumer prices on the rise, natural resources like timber can provide an opportune inflation hedge. Additionally, there are income opportunities and capital appreciation to boot.
Lastly, natural resources offer a portfolio diversification that hedges against equities by adding uncorrelated assets.
“Second, investing in natural resources can help individuals address key investment objectives such as inflation hedging, income generation, capital appreciation and portfolio diversification,” said Carlson.
Wrapped in the Convenience of an ETF
The best way to get natural resources exposure is the FlexShares Morningstar Global Upstream Natural Resource Index Fund (GUNR). GUNR tracks the Morningstar Global Upstream Natural Resources Index.
Getting a natural resources play in an ETF wrapper has its advantages.
“Investing in a natural resources ETF is more practical than investing directly in a physical commodity,” Carlson said. “Outside of precious metals, it’s difficult to physically hold a natural resource. How does the average investor store 1 million cubic feet of natural gas? Further, while private ownership of energy reserves, timberland and mineral rights are available, they’re highly illiquid and often have limited groups of investors.”
“Another advantage to the ETF is its ability to transact, allowing daily liquidity to enter, exit and rebalance exposure,” Carlson added. “An ETF will typically have a much broader investor set and offer investors a transparent, economical and efficient means to constructing portfolio positions. Most importantly, ETFs offer greater, broader exposure, giving investors potentially more upside and diversification.”
For more on multi-asset strategies, visit our Multi-Asset Channel.