Diversification with Commodities

Source: Wells Fargo Investment Institute, as of March 31, 2022. Forecasts are not guaranteed and are subject to change. Strategic hypothetical returns are forward-looking geometric return estimates from Wells Fargo Investment Institute of how asset classes and combinations of classes may respond during various market environments. Hypothetical returns do not represent the returns that an investor should expect in any particular year. They are not designed to predict actual performance and may differ greatly from actual performance. There are no assurances that any estimates given will be achieved. See “Index Definitions and Asset Class Risk Disclosures” link above for the composition of the hypothetical allocations. The allocations to commodities are added to or removed from the U.S. Large Cap (S&P 500 Index) allocation to arrive at a 0%, 2%, or 5% commodities allocation.

Key Takeaways

  • We believe Commodities can help mitigate risk in a diversified allocation, even if the allocation is small.
  • Because of its low correlation with stocks and bonds, we believe including an allocation to Commodities in a diversified portfolio should help reduce expected volatility without sacrificing return.