BENEFITS OF MANAGED FUTURES

"More efficient investment portfolios can be created by diversifying among asset categories with low to negative correlations.” -Dr. Harry M. Markowitz, Nobel Prize Economist.

Seven Benefits of Managed Futures

1. Potential for enhanced portfolio returns.

2. Liquid markets facilitate easy entering and exiting of market positions.

3. Transaction costs are lower then those for comparable cash market transactions.

4. Opportunity for reduced portfolio risk.

5. Ability to profit In any economic environment.

6. Opportunity to participate easily In global markets.

7. Managed Futures offer potential tax benefits versus stocks.

Potential for Enhanced Portfolio Returns

Adding managed futures to a traditional portfolio improves overall Investment quality.

Graph exhibited in 2002 edition of “Portfolio Diversification Opportunities”, published by CBOT.
 
Source:  Barclay Trading Group Ltd., Managed Futures: Barclay CTA Index; Bonds: Lehman Brothers Long-Term Treasury Index; Stocks: S&P 500 Total Return Index

This study suggests that the portfolio with the greatest returns and least volatility Included Managed Futures.

Liquid Markets Facilitate Easy Entering and
Exiting of Market Positions

Large trading volume on regulated exchanges allows speculators and hedgers to buy and sell large numbers of contracts easily.

This liquidity minimizes any adverse disruption of price in the marketplace.

Transaction Costs Are Lower

The magic of leverage, and a competitive marketplace, reduces the cost of trading futures versus cash market transactions.

Reduced Portfolio Volatility Risk

Managed Futures have demonstrated the potential for limiting portfolio risk.

Risk reduction Is possible because of the low to slightly negative correlation of managed futures with stocks and bonds.

As this study shows, there is very little relationship in the price movement (correlation) between stocks, bonds and Managed Futures.

 Ability to Profit in Any Economic Environment

Buy futures positions in anticipation of a rising market.

Sell futures positions in anticipation of a falling market.

The potential to profit in inflationary or deflationary periods.

CTAs can also use strategies employing options on futures contracts that allow for profit potential in flat or neutral markets.

Ease of Global Diversification

CTAs can diversify their portfolios by geography through at least 150 worldwide markets including stock Indices, financial instruments, agricultural and tropical products, precious metals, currencies and energy products.

Global markets create ample opportunity for profit potential and risk reduction through a broad array of non-correlated markets.

Tax Benefits

Managed Futures offer potential tax benefits versus stocks.

According to the Tax Act of 1981, short-term profits in futures are treated as 60% long-term (therefore being subject to a maximum tax of 15%), and 40% short-term (normal taxable income). On the other hand, short-term trading profits in stocks (stocks held less than one year) are treated as 100% short-term.*

This favorable tax treatment for futures can translate for those in the upper tax brackets, saving as much as 30% on taxes on short-term gains In futures versus stocks!*

Alternative Investments such as Managed Futures are not suitable for all investors. CFG recommends Managed Futures should only be used with speculative capital, and that the investment not exceed 20% of investable assets or 10% of a client's overall net worth.

*CFG recommends reviewing any investment tax consideration with a qualified tax professional.

The risk of trading futures, options and foreign exchange can be substantial. Past performance is not necessarily indicative of future results. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all inclusive and its accuracy can not be guaranteed.

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What are Managed Futures
Modern Portfolio Theory
General Overview of Managed Futures
Benefits of Managed Futures
Managed Futures vs. Stocks
Why Invest with Connelly Futures Group
General Overview of CFG CTA Programs
 
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