Navigating the waters of sophisticated investments can be difficult, to say the least. Unless your background is in finance, the terminology alone can be overwhelming. Of course, it doesn’t help when terminology is misappropriated (like Wisdom Tree calling its ETF “managed futures”), or when people who know little to nothing are able to sound like they do by relying on seemingly seamless use of jargon to boost their credibility.
Case in point: the lovely (heavy sarcasm) stock broker (we think) who was next to one of our associates on a flight from Chicago to New York this morning, doling out advice to some finance newbies. He was regaling them with stories of how to make money, and his “market” advice, without any kind of reasons or numbers provided to support his “wise” direction:
- Trade stock options. They’re easy and safe.
- As a stock broker, set your commissions as high as possible, and trade as frequently as possible.
- Never trade on margin.
- Trend following doesn’t work. It never has.
- Forex trading is the best way to make money today.
If your stomach is turning, join the club. For the record: options trading is not easy or safe; churning accounts with high commissions is illegal and immoral; we believe the facts say otherwise on trend following; and on forex… well, here’s all you need to know about our view on forex trading.
This sounds more like a line we’d hear during a backroom deal in the movie Boiler Room than in a real life conversation today, but it brings up a good point.
There’s a reason the old school stock broker (and futures broker for that matter) is going the way of the dinosaur to more of an advisor relationship where money is invested in managers rather than ‘traded’ by a broker.
The broker’s value even when they are of the highest ethical standards is questionable, as they have no track record to review and in many cases no systematic way of making their trading decisions, leaving the client at the whim of their gut feelings about this stock or that. And when they are some of the bad apples such as this guy on the plane – you’re at risk of losing a lot of money fast.
For those of you patting yourself on the back for avoiding working with transaction based brokers who are also in charge of the transaction (i.e. old school stock and futures brokers), finish up and listen up, because the moral of this story (outside of doing just that) extends far beyond the boiler rooms of Wall Street. No matter who you are, what your net worth, or what asset class you’re looking at, before you find yourself working with a guy like the clown above, do your homework. If the individual you’re about to work with sounds perfectly informed, question what you’re hearing, and do your research. If you’re being advised to adopt a strategy you don’t understand, do your homework. Watch your statements. Make sure things add up. If you’re at all concerned, get a second opinion from someone you trust. Ask for references. If you stumble across something that raises a red flag, ask them directly what it means, and dig into the issue further. At the very least, go to Google.
Our point is that no one should ever invest blindly, and that extends to selecting who you’re investing with. This philosophy is part of the reason we publish at the rate we do on the variety of topics that we do. We don’t want you to invest if you aren’t confident in where you put your money. Guys like the one above give the industry a black eye, and try as we might to counteract that, the best way to ensure that those types of fools don’t put investors at risk is through education. Even if smacking him upside the head is the more tempting solution…
Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.
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