Our weekly newsletter is out, and this time we’re taking a look at the long-term risks and benefits of diversification. Unfortunately, it’s not always fun to do the responsible thing. People who pay their insurance premiums year after year may get a little envious when their neighbors spend that money on a new boat. Students who diligently crack open their textbooks on the weekends may pine for the kind of adventures that their less studious classmates are enjoying. And investors who have done the responsible thing and diversified may find themselves gazing longingly at the returns they could be getting if they had only stayed in stocks.
In the long run, the responsible choice is most likely to provide the best outcome and protect you from potentially catastrophic losses – a storm that sweeps away your home, failing your classes and being expelled, or watching a market collapse wipe away your nest egg. But that expectation of future benefits doesn’t make it any easier to ignore the feeling that you’re missing out. And unfortunately for those who have diversified their investments away from a traditional portfolio, the last few years have been tough to watch.
60/40 Portfolio = 60% Stocks (S&P 500) + 40% Bonds (Barclays Capital Long-Term Treasury Index). 42/28/30 Portfolio = 42% Stocks (S&P 500) + 28% Bonds (Barclays Capital Long-Term Treasury Index + 30% Managed Futures (Dow Jones Credit Suisse Managed Futures Index). Disclaimer: past performance is not necessarily indicative of future results. The above index results are for illsutrative purposes only and do not reflect actual investment gains or losses.
Naturally, this got us to thinking – how long would the current rally need to last before the investor without any managed futures exposure would make enough money to overcome the additional losses he/she would incur in the next selloff by not being diversified? Click through to see what we found.
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.