Making the case for commodities exposure in investment portfolios
INSIGHT ARTICLE |
RSM US Wealth Management recommends that investors have a dedicated commodity exposure in their investment portfolios. However, with negative returns in the Bloomberg Commodity Index (BCOM) for years 2011-2014 and year-to-date 2015, asking why we still recommend commodities is a fair question.
There are three main reasons we believe commodity exposure can be additive to an investment portfolio over the long term (i.e., greater than 10-year periods).
- Over time, commodity indexes have had equity-like returns, with equity-like volatility
- Commodity indexes have historically had low correlation with equities and bonds
- Commodities can be a good hedge to inflation, as they have positive correlation to changes in inflation
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