Alternative Investment Based Commodities for Portfolio Hedges
Financial advisors opine that commodities investment involves inherent risk, which paradoxically also, acts as their most exquisite feature when used for strategizing alternative investments. Patrick Robert who is the CEO and co-founder of a financial consulting firm, PKR Investments, says that since how commodities perform is not correlated to fixed income or equities, a certain percentage of an investor’s portfolio can be dedicated to natural resources for lowering the total risk on the long-term basis.
Hedge Functionality:
Robert, who is a financial planner as well, adds that people interested in diversifying their portfolios can use commodities to act as a hedge for them, provided they are not using equities to hit a home run that will go outside the gate. The commodity evaluation is mostly not possible which contrasts traditional assets like stocks that can be examined for value through growth plan and financial metrics of the company based data.
For both silver and gold, their demand and supply in the market decide their value, something that cannot be easily determined. Following the U.S. recession and slow growth of the European economy along with excessive supply, commodities selloff has been broadened within 12-18 months.
However, experts opine that, with the improvement of the global economy, investors will need to warm up to commodities again. This mainly implies to assets that are growth-oriented like the base metals including copper, tin and aluminum- all of which are in demand in markets that are emerging like China (with an increase in the manufacturing sector)
The Timing Factor:
Dave Molnar of HighTower Advisors (managing director) thinks that, at the present moment, it is tough to get hold of, especially when the rise in global and domestic economic rates that was expected, has not come to pass. Financial advisors suggest that this is one of the most advantageous times to invest in commodities as they will take time to grow and produce returns.
However, experts also warn these investors asking them to wait till such time things clear up and they are financially good to take advantage of this alternative investment. Among the natural resources, timber has gained much attention for the impressive returns it offers. Avacade reviews can help you to invest the right way to make the most of forestry investment.
Natural Elements as Commodities:
Among other natural resources, natural gas is highly favored by investors. Tradition Energy analysts say that, despite the drop in natural gas owing to several market changes, an early winter will increase the levels of power generators that have switched from coal to gas for providing energy to power-plants, creating a crisis in the market for this natural resource. This will in turn, help the investors gain profitable returns from this commodity.
Exchange-traded fund or ETF and exchange-traded note (ETN) are highly recommended by experts instead of placing the focus on the market or a single commodity. While selecting ETFs based on commodities, the words, broad and basic’ should be used by investors, according to an investment advisory firm, CitrinGroup’s executive chairman and founder, Jonathan Citrin. Commodities offer growth in a great amount to the average investors who are not interested in a small amount of growth.
Conclusion:
Passive Management Head of Deutsche Asset & Wealth Management Americas, Martin Kremenstein, says that the portfolios have been greatly helped by commodities on an overall basis, despite the changes in the market. He further says that these commodities provide diversification and volatility benefits which places them beside fixed income and equities in the portfolio. Finally, what can be said is that not everyone should invest in commodities. These commodities can be used as a hedge during times of financial inflations thought.
Author’s Bio: Alisa Martin is a proficient writer who is an expert on the subject of finance and investment. She regularly contributes articles on topics like using avacade reviews for beneficial returns and other such alternative investment schemes.
Category: Investing
