Global Macro Traders and Diversification
Most long time investors have heard that diversification is the only free lunch on Wall Street. If you have used a financial advisor to pick your investments for you, you may have been told you were diversified but the way it usually works out your diversification is weak at best and in some cases is almost non existent. Obviously you just need to learn the proper way to diversify.
The typical planner will have you put some of your money in domestic stocks, some in foreign stocks, and then place some money in bonds. If that is all you are doing you are not getting nearly the benefit you could be getting and in reality you are barely diversified at all.
Proper diversification will invest your money in several different asset classes as well as diversify in different trading strategies. Global macro traders have known this for years and consequently as a group have had positive returns over the last ten years.
Global macro investors diversify into several different asset classes. Some of the more common ones are domestic stocks, foreign stocks, Treasury bonds, investment grade corporate bonds, junk bonds, foreign government bonds, foreign corporate bonds, commodities, real estate, and currencies. Some people will go as far as to trade in art and other collectibles as they are uncorrelated to regular investments and therefore add benefit if you have expertise in that area.
One of the best known although regularly ignored tenets of successful investing is to look for the best risk to reward situations. If you dont focus on risk then it will come back to haunt you and cause you to lose lots of money. By looking across multiple asset classes you will be better able to find great risk to reward scenarios as not every asset class is always in a good position to make you money.
Luckily we can diversify not only across asset classes but also across different strategies in each one. For instance if you could allocate some money to a long term value investing strategy that looks at three to five years out investing in stocks and then also invest in a good short term trading fund. By doing this you can capture slightly different types of alpha or excess return. If you build a portfolio this way you will become extremely diversified and uncorrelated to regular investments.
If you do this properly and diversify into not only different assets but also into different strategies inside each asset class you will be able to capture returns that the classis stock bond mix would have missed. While this is no guarantee of positive returns every day, over time you will see a reduction in risk and an increase in reward. Diversification is really a free lunch.
If you are a relatively active investor you can achieve positive returns in multiple asset classes yourself by building market beating models in different markets. Yes, you can and indeed should use bottoms up research but in the spirit of being efficient with your time you should automate as much as possible so that you are able to be a more efficient global macro trader and miss fewer of the potential opportunities that occur in different markets. - 23212
The typical planner will have you put some of your money in domestic stocks, some in foreign stocks, and then place some money in bonds. If that is all you are doing you are not getting nearly the benefit you could be getting and in reality you are barely diversified at all.
Proper diversification will invest your money in several different asset classes as well as diversify in different trading strategies. Global macro traders have known this for years and consequently as a group have had positive returns over the last ten years.
Global macro investors diversify into several different asset classes. Some of the more common ones are domestic stocks, foreign stocks, Treasury bonds, investment grade corporate bonds, junk bonds, foreign government bonds, foreign corporate bonds, commodities, real estate, and currencies. Some people will go as far as to trade in art and other collectibles as they are uncorrelated to regular investments and therefore add benefit if you have expertise in that area.
One of the best known although regularly ignored tenets of successful investing is to look for the best risk to reward situations. If you dont focus on risk then it will come back to haunt you and cause you to lose lots of money. By looking across multiple asset classes you will be better able to find great risk to reward scenarios as not every asset class is always in a good position to make you money.
Luckily we can diversify not only across asset classes but also across different strategies in each one. For instance if you could allocate some money to a long term value investing strategy that looks at three to five years out investing in stocks and then also invest in a good short term trading fund. By doing this you can capture slightly different types of alpha or excess return. If you build a portfolio this way you will become extremely diversified and uncorrelated to regular investments.
If you do this properly and diversify into not only different assets but also into different strategies inside each asset class you will be able to capture returns that the classis stock bond mix would have missed. While this is no guarantee of positive returns every day, over time you will see a reduction in risk and an increase in reward. Diversification is really a free lunch.
If you are a relatively active investor you can achieve positive returns in multiple asset classes yourself by building market beating models in different markets. Yes, you can and indeed should use bottoms up research but in the spirit of being efficient with your time you should automate as much as possible so that you are able to be a more efficient global macro trader and miss fewer of the potential opportunities that occur in different markets. - 23212
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The Macro Trader helps investors find great Global Macro Investing opportunities. Global Macro Strategies help investors to find great risk to reward investing opportunities.
posted by X - Men @ 12:18 AM
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