Commodities can be a portfolio hedge

The most unsettling thing about commodities investments—their inherent risk—is also their best feature as an alternative investment strategy, financial advisors say.

Because the performance of commodities does not correlate with that of equities or fixed income, allocating a small percentage of a portfolio to natural resources can actually lower the overall risk in the long term, said Patrick Robert, co-founder and CEO of PKR Investments, a financial consulting firm.

“For people who want [their portfolios] to be diversified, if they’re not hitting a home run right out of the gate [with equities], commodities can act as a hedge,” said Robert, who is also a certified financial planner.

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