(Yahoo!Finance) - The Santa Claus rally has brought the market to new highs as we enter 2022, but it’s important to remember that stocks don’t always go up in straight lines.
Famed investor Jim Rogers has seen quite a few bear markets in the last half century, and he fears the biggest one yet could be right around the corner.
“The next bear market will be the worst in my lifetime,” he predicted in a Q3 interview with financial advisory firm Wealthion.
To be sure, Rogers has been bearish on the U.S. stock market for years. But the multimillionaire does know a thing or two about making money in turbulent times.
Rogers co-founded the Quantum Fund with George Soros in 1973 — right in the middle of a devastating bear market. From then till 1980, the portfolio returned 4,200% while the S&P 500 rose 47%.
Here are three assets he recommends keeping in your portfolio to ride out a possible 2022 downturn — even if you’re just sprinkling some of your extra cash on them.
Rogers has long been a fan of commodities, and silver is one of his favorites.
“The all-time high for silver is $50 an ounce; now it’s $23. Why can’t silver go back to its all-time high? That’s the way markets usually work,” he says.
Investors love silver because it can be a store of value and a hedge against rising interest rates and inflation.
At the same time, it’s widely used as an industrial metal. For instance, silver is a critical component in solar panels. So with increasing solar adoption, demand for the grey metal could get another boost.
Rising prices benefit miners, so some of the easiest ways to play a looming silver boom are through companies like Wheaton Precious Metals, Pan American Silver and Coeur Mining.
Unlike silver, which is trading at less than half its all-time high, copper hit new heights in 2021.
But Rogers continues to like copper for a very simple reason: electric vehicles.
“An electric car uses several times as much copper as a combustion engineering car, so there’s going to be huge demand for some of these metals that we didn’t have before,” he explains.
“Yes, it’s at all-time highs now, but electric cars are just getting started.”
As is the case with silver, investors can use copper miners to get exposure to the metal. Companies like Rio Tinto, Freeport-McMoRan and Southern Copper are well-positioned to capitalize on the copper boom.
To be sure, many copper miners have already enjoyed substantial rallies in their share prices.
If you’re on the fence about jumping into the metal at this point, remember you don’t have to start big. A popular trading app even allows you to buy fractions of shares with as much money as you are willing to spend.
Rogers loves agricultural commodities, like sugar or corn. But this time, he’s also stressing the importance of farmland itself.
“Unless we’re going to stop wearing clothes and eating food, agriculture is going to get better. If you really, really love it, go out there and get yourself a farm and you’ll get very, very, very rich,” he says.
Indeed, farmland could be a great hedge because it’s intrinsically valuable and has little correlation with the ups and downs of the stock market.
Over the years, agriculture has been shown to offer higher risk-adjusted returns than both stocks and real estate.
The best part? You don’t need to get your hands dirty to get a piece of the action.
New platforms allow you to invest in U.S. farmland by taking a stake in the farm of your choice. You’ll earn cash income from the leasing fees and crop sales. And of course, you’ll benefit from any long-term appreciation on top of that.
A fourth alternative
There's one more overlooked physical asset that has little correlation with the stock market — and it might offer even bigger upside potential: fine art.
Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich, like Rogers. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.
By Jing Pan
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.