Home » Commodities » 4 Inflation Hedge Investment Portfolios

Commodities

4 Inflation Hedge Investment Portfolios

Defensive Trading

January 7, 2023

0 Views 4 comments

SaveSavedRemoved 0

Hedge against inflation with this combination of Inflation Hedge Investment Portfolios including Gold, Energy, Oil, Utilities and Food and Beverage.

Your capital is at risk. Other fees apply.

What are Investment Portfolios?

Investment portfolios are the quickest and easiest way for new and experienced traders alike to gain diversified exposure to the financial markets. They are only available on eToro and are grouped together by industry or use depending on the portfolio.

Below we have gathered four of these portfolios that are expected provide secure exposure during a period of Inflation.

What is Inflation?

As we wrote in our post What is Inflation? regarding what we foresaw as the imminent period of inflation that was approaching:

During periods of high inflation you should expect the Stock Market to fall as real returns for the investor tumble (sometimes to almost zero). 

You should also expect the prices of commodities to increase, often to a point of potential unaffordability for those on the lower end of the wages scale. 

In addition, the housing market usually falls as banks are lending less and increased interest rates are preventing many would-be borrowers from entering the market. 

You should also expect the demand for Bond prices to fall as the real returns investors are receiving from them will fall, also potentially to zero. Defensive Trading: What is Inflation [and Why You Should Care.

So, as a trader what are the portfolios that we should be focusing on during periods of inflation and how can we hedge our trading to account for the changes that are taking place during these market conditions?

Let’s break down the following commodities and consumables portfolios that can be traded in unison as the ultimate portfolio to hedge against inflation.

1. Gold and Energy Portfolio

The commodities industry is one of the most important markets because they play a crucial role in the growth and development of economies. It provides employment opportunities across various income classes, from the miners to the CEO in the boardroom.

While the extraction of finite resources such as gold and oil remain relevant in our world today, the generation of clean energy such as solar power is becoming more and more prevalent as we embrace renewable energy provisions.

The Gold and Energy Portfolio gives investors exposure to the precious metals and energy sectors via the form of several relevant ETFs.

From gold mining and exploration to solar energy generation and infrastructure, this portfolio covers a broad range of asset classes. This composition allows investors to gain entry into an industry powering the world now and for the future, as well as providing diversification across the commodities market.

The minimum investment amount for this portfolio is $500.

Your capital is at risk. Other fees apply.

2. Oil Worldwide Portfolio

The oil industry has always experienced ups and downs due to factors that have affected supply and demand for the commodity.

Geopolitical tensions and global pandemics have resulted in significant drops and gains, creating an opportunity to capitalise on these price movements. The modern world is becoming more globalised, and therefore industries are more interlinked.

Areas such as electricity production, aviation, and the automotive industry rely heavily on the black gold. The Oil Worldwide Portfolio allocates in stocks of the world’s leading oil-related companies, oil-related ETFs and direct oil price derivatives.

The minimum investment amount for this portfolio is $500.

Your capital is at risk. Other fees apply.

3. Utilities Portfolio

Utility companies provide a public service that enables society to make use of basic amenities such as water and electricity.

Due to the nature of these types of companies, investors hold utilities for the long term and expect a stream of income via dividend payments as well as capital appreciation. These companies tend to be less volatile than the broader market and hence many investors utilize these instruments to hedge their portfolios during times of recessions or economic downturns.

Conversely, these instruments tend to underperform during times of expansion. The Utilities Portfolio is composed of companies in the public service sector, specifically, Electricity, Gas, Water and Waste Management stocks that are staples for daily living.

The minimum investment amount for this portfolio is $500.

Your capital is at risk. Other fees apply.

4. Food and Drink Portfolio

No matter what happens in the world, human beings need to eat to survive. And as humanity progresses, so do the change in consumer tastes and demand.

The Food and Drink Portfolio covers the food and drink industries that are considered defensive due to the nature of the products they produce.

The Food and Drink Portfolio allocates stocks of the world’s leading companies involved in different facets of the industry, from fast food, retailers, beverage and food producers.

The constant demand for these products offers an investment opportunity in the companies that provide these necessary services.

The process of selecting assets for the portfolio is as follows: First, the universe of stocks available is scanned for companies that fit the Food and Beverage landscape. Then each stock undergoes a screening process based on a series of metrics, such as market capitalisation, liquidity of the shares, financial ratios and analysts’ consensus ratings. The metrics form the basis for the stocks’ ranking, and finally the top ranked stocks are included in the portfolio and weighted accordingly.

A minimum and maximum allocation weight on the stocks in the portfolio may apply to avoid under/over allocation in the same asset.

The minimum investment amount for the portfolio is $500.

Your capital is at risk. Other fees apply.

Ready to start trading? Open an account now. Need more time? Try a Demo here.

Please make sure to find and follow Defensive Trading on eToro for more trading insight here.

As always, if you have any questions, we would love to hear from you. Please contact us. Happy trading!