Getting Real About Real Assets (Precious Metals, Commodities, Real Estate)

Real assets, such as precious metals, commodities, real estate, and oil, have a place in investors’ portfolios and these assets can be efficiently accessed with exchange traded funds. That includes the FlexShares Morningstar Global Upstream Natural Resource Index Fund (NYSEArca: GUNR).

GUNR provides exposure to the rising demand for natural resources and tracks global companies in the energy, metals and agriculture sectors, while maintaining a core exposure to the timberlands and water resources sectors.

GUNR specifically identifies upstream natural resources equities based on a Morningstar industry classification system, with a balanced exposure to three traditional natural resource sectors, including agriculture, energy and metals.

Real assets can enhance portfolio diversity will reducing correlations to traditional financial assets, such as stocks and bonds.

“Our analysis shows that real assets are generally not highly correlated with stocks and bonds, thus potentially adding diversification to a portfolio,” said FlexShares in a research note. “Asset correlation is a measure of how investments move in relation to one another and when. When assets move in the same direction at the same time, they are considered to be highly correlated. When one asset tends to move up when the other goes down, the two assets are considered to be negatively correlated.”

Investors seeking broad-based real assets exposure can consider the FlexShares Real Asset Allocation Index Fund (NasdaqGM: ASET), which holds three other FlexShares exchange traded funds.

ASET “seeks to provide investors with a core real assets allocation that helps address their inflation-hedging, diversification, and income needs. Designed to serve as a real assets allocation solution, the strategy applies a proprietary optimization to the three underlying funds in an effort to minimize the volatility of returns and lower risk in the fund,” according to FlexShares.

Additionally, ETFs provide one of the most cost-efficient, liquid avenues for investing in real assets.

“ETFs may provide a liquid, diversified vehicle to invest in real assets without the hassle and expense of buying the actual physical asset. We believe ETFs provide daily liquidity and allow investors to participate in this asset class with a lower dollar investment than buying the actual physical assets. Additionally, our research shows that the use of an ETF can potentially make investing in real assets in an IRA easy and hassle-free, which may generally not the case with the actual physical asset,” said FlexShares.

For more information on the commodities market, visit our commodity ETFs category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.