What is a key benefit of including commodities in an investment strategy?

Including commodities in an investment strategy can significantly help in reducing overall volatility in a portfolio. This is primarily due to the low correlation that commodities often have with traditional asset classes, such as stocks and bonds. When stock markets experience downturns or increased volatility, commodities may not follow the same trend, thereby providing a stabilizing effect on the overall portfolio.

By holding a diverse range of assets, including commodities, investors can benefit from the potential for positive returns in sectors that react differently to economic cycles. Additionally, commodities can serve as an inflation hedge, further contributing to the objective of lowering portfolio volatility during inflationary periods. This diversification effect is crucial for investment strategies aiming for a more stable risk-return profile.