One of the words you’ll hear most when talking with experts about investing in commodities is “hedging.”
Commodities have been historically viewed as a hedge against inflation because rising consumer prices are often linked to rising commodity prices.
“Commodity-focused exchange-traded funds, exchange-traded notes and mutual funds are probably among the simplest ways for investors to gain exposure to various commodities without directly owning the physical assets.” – Michael Ashley Schulman, chief investment officer, Running Point Capital
But for those who do want to try to capture the advantages of investing in commodities as a hedge, a rule of thumb is to allocate only about 5% of your portfolio to these raw materials and agricultural products. Here’s what to think about if you’re trying to fill that bucket…
This post originally appeared at U.S. News & World Report.