Portfolio Diversification with Managed Futures
The basic idea of “portfolio diversification” is to spread your risk among multiple non-correlated investments. There is risk in all investing, but not all risk is the same. What causes one investment to lose may cause another to profit while having no effect on a third. Spreading your money around has the potential to lessen the volatility you might have experienced with a single investment while maintaining positive performance overall. However portfolio diversification is not a guarantee of profit.
Unique Benefits of Managed Futures for Portfolio Diversification
Since it makes sense to spread your money between multiple opportunities with little correlation to each other we suggest you think about Managed Futures as one of those opportunities. Consider these benefits:
- Opportunity to reduce the volatility of an investment portfolio
- Opportunity to enhance overall portfolio returns
- Many investment choices
- Opportunity for profit in a variety of economic environments
- Liquidity allows for access to your money quickly
- Managed account and fund structures
- Performance based fees available
“But divide your investments among many places, for you do not know what risks might lie ahead.”
Ecclesiastes 11:2 NLT
As an asset class, managed futures programs generally have little correlation with traditional investments like stocks and bonds. When you understand what Managed Futures are and how Commodity Trading Advisors use the futures markets, this makes intuitive sense. For example, while a regular mild recession might cause stock prices to decline, they may have little to no effect on a CTA with a short position in sugar or coffee. Combining managed futures with traditional assets may improve the efficiency of your overall investment portfolio. Merely diversifying your money, however, does not guarantee success or profit. Each Managed Futures opportunity must be carefully evaluated in terms of risk. This is where our Investment Specialists provide a helpful service as they can explain the unique risks and strategies of individual opportunities.
Portfolio Diversification Data
This is a nice theory, but how does portfolio diversification look when you actually research the numbers? Thankfully, the numbers don’t lie. There is good research to show the historical benefits of including managed futures in an investment portfolio. Click on the link below to see a collection of charts and graphs illustrating our point.
Speak to a FOREMOST INVESTMENT SPECIALIST to learn more about Portfolio Diversification now.
Keep in mind, there is risk of loss no matter who is managing your money. Diversification is not a guarantee against loss.