Diversification Sucks
With US Stocks pushing up to new all time highs once again this week, we’re seeing more talk of going with simple over complex, just doing the basic 60/40 portfolio [link], and so forth. We’re seeing more of the feeling – “Diversification Sucks! I would be waaaaaaaay better if was just 100% long US Stocks… or even better, 150% or 250% long”.
We had some clever things to say on this topic, but found the following post out there (from a few months ago) which said it much better:
Alternative Links: Investor Greats
The Problem With Intuitive Investing, Follow-up: Will Warren Buffett Buy an Oil Company? and JLN Managed Futures: CTAs begin 2015 with a stellar January
The Efficient Frontier Part 2
Contrary to popular belief, The Efficient Frontier isn’t our attempt to write about Star Trek (we can only dream), it’s actually an investment/asset allocation concept put forth by those who believe in Modern Portfolio Theory.
What You Don’t Know Can’t Hurt You?
We’ve been through this before. People suggesting that while the traditional 60/40 portfolio surely isn’t the best portfolio, an average investor probably won’t know the difference between it and a better one – in advance – so why try. Here are our thoughts.
Who’s on the Scoreboard 5 minutes in
If this were a football game (American football), we would be just 5 minutes into the first quarter, making any look at the scoreboard premature to say the least. But hey, months do end, and each asset class posts its number up there on the board for all to see. For those in the red to start the year, there’s a lot of game left… don’t worry about it. And for those, like managed futures, getting out to an early lead – it’s a nice cushion to have against any down periods through the rest of the year.
Disclaimers
Managed futures, commodity trading, forex trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments.
The entries on this blog are intended to further subscribers understanding, education, and – at times – enjoyment of the world of alternative investments. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.
The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any 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.
The performance data for various Commodity Trading Advisor (“CTA”) and Commodity Pools are compiled from various sources, including Barclay Hedge, 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.
The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on RCM’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by RCM, and averaging of various indices designed to track said asset classes.
The mention of market based performance (i.e. Corn was up 5% today) reflects all available information as of the time and date of the publication.
The owner of this blog, RCM Alternatives, may receive various forms of compensation from certain investment managers highlighted and/or mentioned within the blog, including but not limited to retaining: a portion of trade commissions, a portion of the fees charged to investors by the investment managers, a portion of the fees for operating a fund for the investment managers via affiliate Attain Portfolio Advisors, or via direct payment for marketing services.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
See the full terms of use and risk disclaimer here.
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