What is IQRA? (Pros, Cons, and Strategies)

In recent times, there has been a growing interest among investors in diversifying their portfolios to include real assets. One such investment vehicle that has garnered attention is IQRA. In this blog post, we'll delve into what IQRA is, its benefits and drawbacks, and some strategies to consider.

What is IQRA?

IQRA stands for the IQ CBRE Real Assets ETF. This ETF aims to provide exposure to a diversified portfolio of real asset-related securities, including those in real estate, infrastructure, natural resources, and commodities.

IQRA tracks the performance of the IQ CBRE Real Assets Index, which invests in companies that are expected to benefit from the ownership, operation, development, or financing of real assets.

Key Features of IQRA

• Exposure to varied sectors like real estate, infrastructure, natural resources, and commodities
• Focus on companies benefiting from real assets
• Diversified across different asset types to reduce risk

The index tracks these sectors to get a balanced approach to investing in tangible assets that can provide both growth and income potential.

IQRA Composition

IQRA includes a mix of companies from various real asset sectors. Prominent holdings might include real estate investment trusts (REITs), infrastructure firms, energy companies, and companies involved in natural resources. By diversifying across these sectors, IQRA aims to provide stable returns and income generation.

Pros of IQRA

Diversification

IQRA offers exposure to a broad range of real asset categories. This diversification helps spread risk and can offer stability against market volatility.

Inflation Hedge

Investing in real assets can serve as a hedge against inflation. Real assets typically appreciate in value during inflationary periods, providing a buffer against the eroding purchasing power of money.

Income Generation

Many companies within IQRA's portfolio generate stable income streams through dividends and interest. This can be particularly attractive for income-focused investors looking for regular payouts.

Cons of IQRA

High Expense Ratio

One of the downsides of IQRA is its relatively high expense ratio. Managing a diversified portfolio of real assets can be costly, and these expenses are passed on to investors. High expense ratios can eat into your returns over time.

Sector-Specific Risks

While diversification helps spread risk, each sector within IQRA has its own specific risks. For example, real estate can be affected by interest rate changes, while natural resources can be impacted by commodity price volatility.

Limited Growth Potential

Compared to tech-focused ETFs, IQRA may offer limited capital appreciation. While it provides stability and income, it might not yield the high growth rates seen in other sectors.

IQRA Investment Strategies

Given its unique composition and focus, IQRA can be a valuable addition to a well-rounded portfolio. Here are some strategies to consider:

Long-term Investment Strategy

IQRA is suitable for long-term investors looking for both income and growth. The mix of real asset sectors provides stability, making it an ideal choice for those planning to hold their investments for an extended period.

Balancing Your Portfolio

Incorporating IQRA into your investment portfolio can add a layer of diversification. It balances out the volatility of heavily weighted tech or high-growth sectors, providing a more stable overall portfolio.

Focus on Income Generation

Investors looking for regular income can benefit from the stable dividends and interest generated by IQRA’s holdings. This strategy involves reinvesting those dividends to maximize the compound effect over time.

Defensive Approach

During economic downturns or periods of high inflation, real assets tend to perform well. IQRA can act as a defensive measure within your overall investment strategy, safeguarding against market volatility.

Conclusion

IQRA presents a compelling option for investors looking to diversify their portfolios with real asset exposure. It offers a balance of income and potential growth, combined with the benefits of diversification and an inflation hedge. However, like any investment, there are trade-offs, including higher expense ratios and sector-specific risks.

Before investing in IQRA, consider your financial goals, risk tolerance, and investment horizon. By understanding its advantages, disadvantages, and suitable strategies, you can make an informed decision about whether IQRA aligns with your investment objectives.