Artificial Intelligence (AI) is taking the markets by storm, but real assets are offering attractive portfolio yields and potential price appreciation to hedge against inflation and add further diversification benefits to the portfolio.
Amidst the AI euphoria, Nvidia alone has grown from $350 billion to nearly $1 trillion this year, while Apple, Microsoft, Tesla, Alphabet, and Meta on average are up nearly 50% this year. This bubble could be unsustainable and having a similar impact as the creation of the internet where investors had to wait for years to get their money back.
Instead, investors should consider real assets, such as the VanEck Inflation Allocation ETF (RAAX). The fund invests in three types of real assets: financial, resource, and income assets. Currently, the allocation for income assets accounts for 30%, while financial assets account for 27%, providing a hedge against economic weakness, systemic market shocks, and inflation.
Moreover, unlike growth stocks, real asset investments offer significant upside due to the supply-demand imbalance across commodities and attractive earnings of natural resource equities. Yet, despite investor views on growth and inflation, only 18% of investors surveyed own enough real assets to diversify against these risks properly.
While fears of a recession may have sent investors running from commodities and other real assets, investing in expensive, growth-heavy U.S. stock market indices may lead to a false sense of security. By considering real assets, such as RAAX, investors can take advantage of the tremendous opportunities to re-allocate their portfolios while achieving attractive portfolio yields and enhancing diversification benefits.
Frequently Asked Questions (FAQs) Related to the Above News
What is the current trend in the investment market?
The current trend in the investment market is towards Artificial Intelligence, however, investing in real assets is also gaining popularity due to its potential for yield and diversification benefits.
How have stocks like Nvidia, Apple, Microsoft, Tesla, Alphabet, and Meta performed this year?
These stocks have performed well, with an average increase of almost 50% this year. Nvidia alone has grown from $350 billion to almost $1 trillion this year.
What risks are associated with investing in growth stocks?
There is a possibility that the growth in these stocks could be unsustainable and lead to a market bubble. Investors may have to wait for years to get their money back, as was the case with internet stocks in the past.
What is VanEck Inflation Allocation ETF (RAAX)?
VanEck Inflation Allocation ETF (RAAX) is an investment fund that allocates its investments to three types of real assets: financial, resource, and income assets. It offers a hedge against economic weakness, systemic market shocks, and inflation.
What is the current allocation of VanEck Inflation Allocation ETF (RAAX)?
Currently, the allocation for income assets accounts for 30%, while financial assets account for 27%.
Why should investors consider investing in real assets?
Investing in real assets offers significant upside due to the supply-demand imbalance across commodities and attractive earnings of natural resource equities. Real assets provide a hedge against economic weakness, systemic market shocks, and inflation.
How can investing in real assets benefit investors?
Investing in real assets offers attractive portfolio yields and enhances diversification benefits.
How many investors surveyed own enough real assets to diversify against the risks properly?
Only 18% of investors surveyed own enough real assets to diversify against these risks properly.
Please note that the FAQs provided on this page are based on the news article published. While we strive to provide accurate and up-to-date information, it is always recommended to consult relevant authorities or professionals before making any decisions or taking action based on the FAQs or the news article.
