FREE Simulated Trading
When you sign up for BEST Test simulated trading, you will receive a $50,000 test account that gives you a simple, risk-free way to try out the BEST Direct platform. It takes you only a couple of minutes to sign up for a BEST Test account and to download the software.
Benefits of Managed Futures
Reduced Portfolio Volatility Risk
The primary benefit of adding a managed futures component to a diversified investment portfolio is that it may decrease portfolio volatility risk. This risk-reduction contribution to the portfolio is possible because of the low to slightly negative correlation of managed futures with equities and bonds. One of the key tenets of Modern Portfolio Theory, as developed by the Nobel Prize economist Dr. Harry M. Markowitz, is that more efficient investment portfolios can be created by diversifying among asset categories with low to negative correlations.
Potential for Enhanced Portfolio Returns
While managed futures has the potential to decrease portfolio risk, it also has the potential to simultaneously enhance overall portfolio performance. This is substantiated by an extensive bank of academic research, beginning with the landmark study of Dr. John Lintner of Harvard University, in which he wrote that "the combined portfolios of stocks (or stocks and bonds) after including judicious investment& .in leveraged managed futures accounts shows substantially less risk at every possible level of expected return than portfolios of stocks (or stocks and bonds alone).
Ability to Profit in Any Economic Environment
Managed futures trading advisors can take advantage of price trends. They can buy futures positions in anticipation of a rising market or sell futures positions if they anticipate a falling market. For example, during periods of hyperinflation, hard commodities such as gold, silver, oil, grains, and livestock tend to do well, as do the major world currencies. During deflationary times, futures provide an opportunity to profit by selling into a declining market with the expectation of buying, or closing out the position, at a lower price. Trading strategies can even use strategies employing options on futures contracts that allow for profit potential in flat or neutral markets. There is also a substantial risk of loss.
Ease of Global Diversification
The establishment of global futures exchanges and the accompanying increase in actively traded contract offerings have allowed trading advisors to diversify their portfolios by geography as well as by product. For example, managed futures accounts can participate in at least 50 different markets worldwide, including stock indexes, financial instruments, agricultural and tropical products, precious and nonferrous metals, currencies, and energy products. Trading advisors thus have ample opportunity for profit potential and risk reduction among a broad array of non-correlated markets. There is also a substantial risk of loss.