Global Macro Investing and Different Asset Classes

By John Keynes

There are ten asset classes that are regularly traded by global macro investors. Real estate, venture capital, equities, currencies, commodities, cash, bonds, collectibles, statistical arbitrage, and private equity. While a few of these are tough for individual investors to get into, the majority are easily accessible.

Cash is considered the asset class of last resort. You go to cash when you don't have anywhere else to put your money. Remember that we want great risk to reward situations, so when we can't find one we sit out in cash.

Equities are the next asset class on the list. We include domestic, foreign, and even emerging market stocks in the same broad asset class category. Equities represent ownership in a company.

Bonds also known as fixed income are simply loans to governments and corporations. In return for the loan you get interest payments. Most global macro traders look at US government, foreign government, and corporate bonds when looking for a fixed income trade. By looking at multiple sub classes we have more opportunities for great risk to reward trades.

Next on the list are commodities. Commodities include precious metals, base metals, energy complex, agricultural goods, and livestock. Basically global macro trades lumber, oil, gold, etc if the risk to reward is in place.

The largest asset class is that of currencies. Currencies have long been one of the primary trading assets for macro traders. If you have an opinion on one country versus another then you have a basis for a trade. If the reward outweighs the risk then you can have another asset class to trade.

So what of the other assets classes? Well they tend to be less liquid so you need a lot of money to trade them well. For instance you can make a lot with real estate but you need to have a long time horizon. Same goes for art, venture capital, and private equity. You can trade this stuff but it takes a different time frame then most investors are used to. - 23212

About the Author:

The Macro Trader does research for a newsletter that gives the Global Macro Trader actionable trading ideas each week. Mean Reversion is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.