When someone wants to look to commodities as an investment, they are often curious as to what types of investment they should pursue. Should they go off and trade on their own? No, because most likely someone who is looking to invest does not have the decades of experience and the technical savvy it takes to become a successful day trader. An obvious choice for these people would be to invest in a managed futures fund.
In case you did not know already, an investment in managed futures acts very similar to a mutual fund. You would simply invest your money in the fund, and a CTA (Commodity Trading Advisor) would trade the account on your behalf. In turn, you would receive monthly statements from your CTA regarding your account balances and open positions, as well as have access to your account information in real-time. This type of program is the optimal investment vehicle for people investing in commodities.
How popular are commodities investments in the investment world? Is investing in commodities for me?
When you are looking for investment ideas to diversify your portfolio, you will hear more and more about futures funds. Over the past 30 years, the funds of people investing in commodities, more specifically commodity funds, have skyrocketed past $130 Billion. The popularity of these funds seems to be rapidly increasing as time goes on.
Yes, there is a reason for the growing popularity of investing in managed futures. For the first time in over 60 years, the stock market has had a 3 year decline in returns, and the market has not achieved its highs from 1999. As a result of the recent poor economic conditions, corporations continue to fail striking fear in the markets, and hence, increasing the volatility of the markets.
Investing in commodities, you are investing in futures and futures options. Futures are generally uncorrelated with the equity markets. Many professionals in the financial industry believe this makes a commodities investment an effective diversification strategy.
When looking to invest in commodities, two managed futures funds come to mind. The first fund, called the Epoch3 Program, was incepted last July of 2009 and has returned +39.59% in the first 11 months.
The second fund, called the Medallion Program, was incepted last February of 2009 and has returned +47.08% in its first 16 months.