They say, the only free lunch in investing is diversification. The idea is that by pairing various asset classes, ETFs and stocks together, investors can reduce their overall risk and boost their long-term returns. After all, various asset classes move differently at different times. The same asset class isn’t always the top dog in terms of returns.
The problem is, most investors have a false sense of diversification.
Over time, various sectors of the market and even bonds have increased their correlations to each other. That is, they move together. And when that happens, the powers of diversification go out the window. But there is one asset class that is easily accessible by ETFs, which still offers plenty of diversification benefits and low correlations to other asset classes.
We’re talking about commodities ETFs.
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