Why a Managed Futures Investment Matters to You!

For a great many investors today the idea of investment in commodities is as about appealing as root canal surgery. And, that more than anything else, is tragic and grossly misinformed.

Part of the problem stems from a serious lack of understanding of the differences that exist with respect to garden variety commodity trading/investing versus Professionally Managed Futures Investing. In some respects the differences can be stark. For some there is little or no distinction. But for those in the know the distinctions are precisely the reason to invest in managed futures.

The biggest difference is professional management. The sad truth is that most people that have horror stories about commodity trading weren't handled absolutely professionally. The presumption is that the person on the other end of the phone line, whose title is "Commodity Broker" is a knowledgeable, qualified professional. I hate to be the one to tell you: nothing could be further from the truth! Most brokers have a basic understanding of the markets and the terminology but lack any real in-depth knowledge or expertise. Simply put: they are salesmen, not traders! They are also account managers, customer service reps and cold-callers.

You do not need a professional money manager to invest in futures. However, the futures markets are so vast that it is difficult, if not impossible, for an individual to master more than a small segment of trading. The term "managed futures" describes a managed approach to futures market participation whereby professional money managers called commodity trading advisors ("CTAs"), trade futures and forward contracts pursuant to a limited power-of-attorney or limited trading authorization. CTAs are professional money managers specializing in trading futures and forward contracts. The term "CTA", however, is a misnomer-while futures and forward contracts may represent agricultural products, energies, cattle, hogs, metals, and other commodities, many CTAs also focus on trading currencies, financial instruments, stock indexes and single stock futures. CTAs work full time to trade and manage investments and are registered with the National Futures Association.

When investing in managed futures, the goal is to profit from moves in the contract prices of commodities, stocks, bonds and currencies, not an appreciation in value of the underlying asset. Each CTA employs his or her own strategy for profit maximization. Among the biggest benefits in managed futures investing in this financial environment is the idea that it can be done without consideration of economic circumstance or condition. It can be employed successfully in inflationary or deflationary environments. It can be beneficial in rising, falling or flat markets. It's generally transparent and liquid, so you're typically more aware and quite nimble. The benefits that professional management offers with managed futures are similar to those experienced with mutual funds and investment advisors. These include:

• Full-time dedication to the markets
• A disciplined trading approach
• Money management techniques that seek to control losses and protect profits
• Strategies that attempt to balance risk and reward

With the current uncertainty in the stock market as well as most traditional investments, managed futures as an asset class provides sound diversification that makes sound business sense. For a well-balanced portfolio investment in managed futures can represent, not only an efficient downside risk hedge, but also a very timely and opportunistic upside opportunity.

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