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Portfolio Building with Commodity Futures Trading Systems |
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When selecting a commodity futures trading system to add to your investment portfolio, there is more to be considered than just the system or systems selected. How these systems will fit in and how they correlate with your entire investment portfolio must be considered.
Worldwide Futures Systems, unlike most commodity futures brokers, will evaluate your entire investment portfolio before helping you build an alternative investment portfolio of commodity futures trading systems. If you currently have a heavy weighting in traditional equity or bond markets, we will recommend systems with a low correlation to those markets. In fact, studies by Harvard professor, Dr. John Litner and the Chicago Mercantile Exchange confirmed that an alternative investment in a diversified commodity portfolio alongside a standard stock and bond portfolio actually lowered risk and increased overall profitability. Additionally these alternative investments showed a low to slightly negative correlation to the rest of the portfolio. When stock and bond values increased so did the diversified commodity portfolios. The real value to this alternative investment strategy showed when stock and bond prices fell dramatically the value of the commodity portfolios tended to increase dramatically.
Of course, you can also be sure that we will only use commodity futures trading systems that correlate very lowly or even negatively to each other within your commodity futures trading portfolio. Too often, commodity futures system traders will trade several “different” systems, which in reality are very similar and unfortunately result in dramatic declines at the same time, forcing a trader to abandon the strategies, usually at the bottom of the fall. We strive to build a portfolio of neutral or negatively correlated systems so that those sharp declines are avoided, and our clients can continue to trade their portfolio for a lengthy life.
Ideally, a commodity futures trading system portfolio will contain a mix of long term and short term systems, as well as a mix of diversified and sector-specific systems. Worldwide Futures Systems offers several trading systems that fit these profiles and we have investigated and tested these systems to be sure they are responsibly and robustly designed and executed. We feel it is also important that a system fits the personality and risk profile of all our clients. We find that when clients are familiar and comfortable with the risks involved with a particular system, they are more successful in following the strategy of the trading system.
Along with our initial consultation and portfolio building process, Worldwide Futures Systems helps you to continually review your portfolio to ensure it is meeting the goals and maintaining the risk/reward profile expected. Worldwide Futures Systems also continually monitors each trading system individually to ensure its behavior remains consistent.
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