subject: Dispelling The Myths Of Managed Futures [print this page] There are many myths associated with Managed Futures. Many people believe that they are extremely risky investments to become involved with.
However, they really hold no more risk than stocks. The risks associated with trading commodities are much higher than stocks.
It is true that amateur traders will most likely lose when trying to play this game for the first couple of times. Hiring a Commodity Trading Advisor or CTA, can help you navigate Manage Futures and avoid these losses.
Of course, there is always risk involved, as with any investment. You could lose even more than your initial investment.
The Modern Portfolio Theory (MPT) is a theory to help relied upon by sophisticated investors and pension funds obtain the biggest returns with the lowest risk. The people who came up with this theory received a Nobel Prize for their ideas.
Perhaps one of the largest fables associated with this is that most investors do not believe that they qualify to have a Commodity Trading Advisor help manage their accounts.
There are several reasons new investors may believe this. One reason is that because there is a documented record specifically for individual investors they believe that it is something that can and should be done on their own.
They also assume that they would not meet the qualifications because their account sizes are too large. In addition, Managed Futures have been a level of investment that has only been available to organizations and high net worth people. However, these things are all changing.
Managed Future programs have recently lowered the standard of qualification necessary to invest. It is now an option to the everyday investor.
For example, many people believe that an investor needs hundreds of thousands of dollars to invest. In reality, accounts can be opened with only $35,000.
One of the largest turn-offs is that potential investors have heard stories of how 8,000 bushels of Corn were dumped on their front lawn from a truck. Occasionally miscommunication has occurred resulting in actions like this, but there are precautions in place to prevent this from happening.
Usually, these mistakes happen when a new investor is still trying to figure out the ropes. If the investor had hired a Commodities Trading Advisor, these miscommunications and mistakes would have easily been avoided.
CTA's are required to be registered through the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). These organizations regulate CTA's and investing to make sure that there is as little fraud as possible occurring in association.
A professional CTA will give a document to potential investors. This document discusses all of the risks associated with investing and the past successes and failures of the CTA's organization.
In general, CTA programs have discovered that people prefer to take lower returns for lower risk. They would like to get some, rather than lose a lot and have a huge win once later on.
However, CTA's will discuss what level of risk you are willing to take on and what your goal of earnings is. They are experienced, and will invest the money in your account in the best possible way.
Another myths associated are that Commodity Trading Advisors do not help investors be more successful in making more consistent and larger returns. However, CTA's can and will help you be more successful in this type of investing.
Most of the time, amateur investors are inexperienced and the ones who lose the most, the majority of the time. With the help of a CTA, Managed Futures investing can be a very worthwhile and rewarding opportunity.
There is no other experience quite like it. While investing should not be depended on for retirement, it can add a large savings account worth in money to the future.
