It may be time to consider investing in commodity-based exchange-traded funds, says one money manager.
As tensions between Russia and Ukraine escalate, stock-based strategies are taking a backseat to those focused on assets such as oil and gold, Astoria Portfolio Advisors CEO John Davi told CNBC's "ETF Edge" last week.
"The wonky term is that they have positive skewness," said Davi, also his firm's founder and chief investment officer.
Get Southern California news, weather forecasts and entertainment stories to your inbox. Sign up for NBC LA newsletters.
That means that unlike stocks, "they have the ability to go up when you have geopolitical risk," he said.
Davi recommended three broad-based commodity baskets for hedging against both global risks and rising inflation:
- Invesco's Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC)
- The Aberdeen Standard Bloomberg All Commodity Strategy K-1 Free ETF (BCI)
- The GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (COMB)
"It's worth having in the portfolio just to diversify your risk attributes," he said broadly of commodity ETFs.
Money Report
Right now, investors can even hold some commodities at no cost because of a phenomenon known as backwardation, or when front-month futures prices are higher than those further on the curve, making it profitable to roll futures contracts over, Davi said.
They're not hesitating, either, ETF Trends CEO Tom Lydon said in the same interview.
"We're seeing commodities shoot up all over the place," Lydon said. "Rising rates can be very, very detrimental to client portfolios. Advisors understand that. Investors haven't seen that in a long period of time but they're voting with their feet."
Oil prices spiked Tuesday on heightened concerns around geopolitical risk. Gold prices hovered near a nine-month peak.
