ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Multifactor
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Multi-Asset Channel
  2. The Case for Diversified Energy Market Exposure
Multi-Asset Channel
Share

The Case for Diversified Energy Market Exposure

Elle CarusoJun 06, 2022
2022-06-06

Despite the dramatic impact of recent energy price movements on the equity markets, investors should be cautious about making short-term, tactical movements in their portfolios.

Surging oil prices following Russia’s invasion of Ukraine in late February sparked broad-based stock sell-offs around the world. Investors reacted immediately, concerned that limited energy supplies and higher costs could exacerbate inflation, then jumped back into stocks just as quickly when oil prices began ticking down, FlexShares wrote in a recent insight

Long-term investment success depends on proper diversification across an entire portfolio, as well as within the individual strategies used to achieve an investor’s desired exposures, according to FlexShares.

“For example, a commodities strategy heavily concentrated in oil and gas producers that may have delivered higher returns during February and March of 2022 is subject to higher risk of losses when demand for energy declines,” the firm wrote in a recent insight. “A well-diversified natural resources strategy that includes exposure to other important sectors can provide the inflation-hedging and return potential that investors seek, without taking additional risks related to an energy sector that’s still in the midst of a long-term transition.”

Likewise, the firm said infrastructure strategies should balance investments across sectors to avoid concentration in energy-related industries like pipelines and utilities. Geographic diversification can also reduce risks related to regulations, political activity, and natural disasters.

Two well-diversified funds that may offer protection in volatile markets are the FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR A+) and the FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA A). 

Volatility driven by short-term swings in oil prices has continued since the start of the conflict, demonstrating the impact of oil prices on investment portfolios. However, investors with exposure to energy-related sectors through commodities and infrastructure strategies likely have experienced a smoother ride.

Choosing well-constructed, well-diversified real asset and infrastructure strategies can help investors increase the odds of achieving their goals under a broad range of circumstances, according to FlexShares. 

For more news, information, and strategy, visit the Multi-Asset Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X