With volatility continuing to rock the markets, we’ll start with an eye-opening chart…
It’s of the tech-heavy Nasdaq (red line) – which is packed full of mega-cap tech stocks.
And I’ve plotted its performance against three “hard asset” recommendations from the Legacy gurus I’ve shared in these pages.
Oil and gas stocks (dark blue line)… agricultural commodities (green line)… and gold (orange line).
As you can see, this year, all three have outperformed the Nasdaq by double-digit margins.
I know it isn’t a sexy topic.
Most folks in the mainstream press want to keep feeding you exciting stories and promises of riches. They’re not interested in the “boring” stuff that actually helps you build and hold on to wealth.
But we don’t do mainstream at the Cut.
My job is to pass on insights and recommendations I’d want my own friends and family to have in this uncertain time.
And this is one of the most valuable insights we share with our readers about how to protect your wealth…
So let’s dive in…
Examples include land, real estate, and commodities like oil, copper, and agricultural commodities.
These are all essential to modern civilization. And they’re in limited supply. Unlike the U.S. dollar, banks and central banks can’t conjure them up out of thin air.
Their scarcity makes them safe havens in times of high inflation. That’s why so many investors are seeking safety by parking their money in hard assets.
You can see what I mean from the three exchange-traded fund (ETFs) in the chart from earlier.
The first is the Invesco DB Agriculture Fund (DBA). It tracks the price of wheat, soybeans, corn, and eight other commodities.
It’s up 11% so far in 2022.
The second is the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). It tracks a basket of oil and gas stocks. And it’s up 31% this year.
I’ve also included the SPDR Gold Trust ETF (GLD). It tracks the price of gold.
Although it’s flat for the year, that’s a lot better than the 29% loss for the Nasdaq.
They’re zigging while other investments, like tech stocks, zag.
So if you’re a tech investor and have exposure to them, they’re cushioning the blow of the bear market in tech.
That’s why colleague Teeka Tiwari built the model portfolio of our Palm Beach Letter advisory around an asset allocation plan. As he explained it…
The most important factor for your long-term wealth is asset allocation.
What percentage of your money should you invest in stocks? What percentage in bonds? How much real estate should you own? What percentage in options? How much in cryptos? What amount of cash?
How you answer these questions is what really moves the needle in terms of your wealth.
Studies of real-world investor returns back up the benefits of diversifying across assets.
One study looked at 10 years of monthly returns for 94 balanced mutual funds… and 10 years of quarterly returns for 58 pension funds.
It found that asset allocation explained about 90% of the difference in how those portfolios rose or fell over time.
Here at Legacy Research, we’re still bullish on the crypto revolution… artificial intelligence… gene-editing… the clean energy transition… and the other tech megatrends we follow.
But we don’t have a crystal ball. We can’t be sure whether the stock market will be higher or lower over the next three months… six months… or year.
So instead of trying to predict what will happen over these time frames… our best bet is to prepare for different outcomes with an asset allocation plan.
You can still aim to shoot the lights out with cryptos, pre-IPO (initial public offering) shares, and bleeding-edge tech stocks.
But with the stubbornly high inflation we’re living through… their historical role as a safe haven in volatile times… and the benefits of diversification they bring… make sure to include some hard assets.
XOP, DBA, and GLD are great places to start.
We miss your questions and comments. So make sure to write us at [email protected].
My team and I read every email you send in.
Until tomorrow,
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Chris Lowe
May 12, 2022