Why diversification, duration and scarcity are important today

David Schassler shares how innovation and financial instability are creating a new investment landscape and how to allocate for success.

Transcription

The new investment paradigm

So today we will talk about two topics. The first is why we believe we are in a new investment paradigm. And then we’ll talk about how to invest to be successful in this new investment paradigm.

Powerful forces at work

We believe that the new investment paradigm is marked by two very powerful forces. The first being innovation. The second is financial instability. Innovation is driven by AI. We strongly believe that AI will be as disruptive as the Internet was in the 1990s. The Internet changed everything. We believe AI will do the same. That will create a lot of investment opportunities.

The the second hallmark is financial instability. We are in a world of huge deficit spending, huge deficits, huge interest expenditure, huge money supply. All this leads to financial instability.

Allocating to find success

Starting with stocks. AI is a huge topic. Nvidia (NVDA, NVDA:CA) is obviously the biggest example of this. Nvidia is defying the laws of financial gravity right now. If Nvidia continues to grow at its current growth rates, it will be bigger than the S&P 500 in less than a few years.

We don’t think this continues. Remember, if you go back to the internet days, Yahoo had a bigger market cap than Amazon (AMZN), bigger than Apple (AAPL), bigger than Google (GOOG, GOOGL). Tomorrow’s winners have not yet been crowned today. We think things will look a lot different in the coming years. And we want you to prepare for that by diversifying, diversifying into technology stocks.

The second is fixed income. Financial instability translates into upside interest rate risk from our position. If you can shift your portfolio towards a shorter duration, you can raise your yield and what you can do is protect against the risk of interest rates rising due to greater financial instability.

And finally, real assets. This is our greatest appeal now. We want you to diversify your asset allocation into real assets. We want to see 5% to 10% of your assets in a diversified basket of real assets. What real goods are we talking about?

Gold is a direct hedge against financial instability. We believe that everyone’s portfolio should now have exposure to gold bullion.

Goods. Commodities provide exposure or protection against financial instability. Yes, but there’s another kicker there. Commodities also provide exposure to innovation. The new world will need more energy, more infrastructure. You need more commodities to facilitate that so you get the benefits of financial instability protection by owning a shortfall asset, but you also get exposure to the future world and the future world again more energy, more infrastructure .

Today we talked about the new investment paradigm and then we talked about how to allocate to be successful in this new paradigm. Market dynamics are changing and changing fast. Now is the time to diversify.

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Important disclosure

Please note that VanEck may offer investment products that invest in the asset classes or industries included in this video.

This is not an offer to buy or sell or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not imply the provision of personalized investment, financial, legal, tax advice or any call to action. Certain statements contained herein may constitute forecasts, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication and are subject to change without notice. The actual future performance of any assets or industries mentioned is not known. Information provided by third-party sources is believed to be reliable and has not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the authors, but not necessarily that of VanEck or his other employees.

Investing in commodities can be very volatile and investing directly in these markets can be very risky, especially for inexperienced investors.

There are inherent risks with investing in stocks. These risks include but are not limited to the stock market, manager or investment style. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.

Investments in gold are subject to risks associated with the concentration of its assets in the gold industry, which may be significantly affected by international economic, monetary and political developments. Investments in gold may decline in value due to developments specific to the gold industry. Foreign investments in gold security involve risks related to adverse political and economic developments specific to a country or region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments or political, economic or social instability. Investments in gold are subject to the risks associated with investing in US and non-US issuers, commodities and commodity derivatives, commodity tax and commodity derivatives, the gold mining industry, financial derivatives, emerging market securities, trading in foreign exchange, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small and mid-cap and subsidiary risks.

All investments are subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit and does not protect against a loss in a declining market. Past performance is no guarantee of future results.

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