This article was originally published on ETFTrends.com.
Amid a positive jobs report last Friday, the Federal Reserve also announced that core inflation reached 2 percent--the first time since April 2012--an ideal economic environment for an exchange-traded fund that focuses on real assets.
The VanEck® Vectors Real Asset Allocation ETF (RAAX) provides real asset exposure through a variety of ways, including domestic equities, foreign equities, master limited partnerships, physical commodities, ETFs, commodity pools, commodity trusts, exchange-traded notes, and cash equivalents. RAAX repositions its holdings monthly to capitalize on any real asset opportunities that its model deems profitable.
"It (RAAX) considers a whole slew of assets," Brandon Rakszawski, Product Manager at VanEck, told ETFTrends.com. "Anything from physical gold all the way through to coal and steel equities."
In addition to adding diversification to a portfolio, the addition of real assets may also allow investors to hedge against inflationary pressures. By seamlessly flowing from one real asset class to the next, RAAX can adjust to current market conditions, regardless of what the Federal Reserve's next moves are regarding monetary policy.
Opportunities in REITs and Coal
With the Federal Reserve's most recent decision to raise the federal funds rate by 25 basis points and with hints that their hawkishness may continue through the rest of 2018, it might seem like rising rates would affect real estate investments due to rising short-term rates that may discourage financing. However, RAAX is finding opportunities in real estate investment trusts (REITs).
"In this month, it (RAAX) increased its position from zero to 20 percent into REITs," said Rakszawski . "So the model indicated some bullish indicators or signals for the REIT segment."
Likewise, the RAAX model propelling its holdings also signaled a bullish sentiment in coal through the VanEck Vectors Coal ETF (KOL). KOL did cross below its 200-day moving average towards the end of June, possibly presenting a buying opportunity that RAAX picked up on--KOL has risen as high as 2.2 percent within the last five days and is up 23.83 percent the past year.
This in-and-out of real assets strategy has yielded RAAX a 1.4 percent return year-to-date and with changing market conditions as of late due to trade disputes, it may continue to thrive through the rest of 2018.
"We're really pleased with the interest we've seen in not only just real assets in general, but the strategy behind this particular ETF," said Rakszawski.
For more market trends, visit ETFTrends.com.
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