We don’t like the old school buy and hold stock approach, as many of you know.
But that doesn’t mean there aren’t some smart people out there talking about stocks. Barry Ritholtz and Josh Brown, for starters. We respect them because they have long scoffed at the idea of “buy, hold and pray” as an investment strategy, preferring tactical asset allocation over the typical stocks casino approach.
One piece of advice they’ve repeated on many occasions is that the silver lining of stocks plummeting is the opportunity to do some bargain shopping. But this isn’t run of the mill, stop-in-because-you-see-a-sale-sign bargain shopping. This is like those people who prepare and train for those Black Friday discounts every year. You’ve got to get ready BEFORE the doors open, or you’ll miss your chance.
Brown, in particular, suggests that you make a list of the stocks you wish you had, and the price they’d have to dip to for you to justify buying them. As the old saying goes: If you liked it at $50, you’ll LOVE it at $25. Not bad advice if you must go the stocks route, and it made us think that investors should be doing the exact same thing with managed futures programs.
Maybe you don’t have $500k to put into Integrated right now, or are worried that the multi-year highs for Emil Van Essen are unsustainable in the short term. Whatever the case, there comes a time for all but those with unlimited funds where they say: “I like that program, but just can’t afford it right now,” or “I want into that program, but not here at all time highs when xxx is about to happen.”
Most brokers will tell you not to wait, to do what you can to get in now. But our advice is to go ahead and wait. Put those programs on your shopping list alongside the bread, milk, and any stocks you would like to own at a better price.
And unlike stocks, where there can be extended multi-year moves higher despite all that is wrong with them – regular drawdowns are a fact of life in the managed futures space – meaning that program you like will be down at some point. The minimum will usually remain the same, unlike stocks, where your investment amount falls along with the stock price. But the amount at risk can come down with a managed futures program in DD.
So get out your pen and paper (or iPad) and make a wish list of programs you would invest in, should you come into some money, see a new max DD in that program, or find yourself with gains elsewhere in your portfolio needing further diversification. In the investment world, the store will come to you, not the other way around… so make sure you have your list ready for when it shows up.