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Is It Possible To Generate 15% Long Term in Commodity Trading

InvestorEducation / Commodities Trading Jul 19, 2009 - 01:42 AM GMT

By: Andrew_Abraham

InvestorEducation

The question is it possible to generate 15% long term in commodity trading? The answer is yes and no. What is more surprising for some ( inexperienced commodity trading investors)…this is not enough. They want crazy double or triple digit profits without realizing they are increasing the potential for the same in draw downs.


The reality is it is very difficult to accomplish 15% over long periods of time in commodity trading and trend following.. Only commodity trading advisors and experienced commodity traders who understand risk and deal with risk on a daily basis have and have the potential to continue to generate these types of returns. However, one must realize these are not 15% every year…year in and year out… It is more like ..up 5%.. up 25%..down -4% a rare…up+42%…

When commodity trading you can do the exact same thing.. meaning same system or methodology…same large group of markets…and in one year make lets 4%…the next lose maybe even -10% or greater…and then have a year in which you earn +56%. I make the analogy that commodity trading is like fishing. You can have the best equipment..and not catch fish..and once in a while you enter a school of fish and can not stop pulling them in. If one is looking to compound their net worth..the only way is to be patient…disciplined..when they do their own commodity trading or when they allocate to a commodity trading advisor. ( The basis should be trend following with a strong risk basis)

Compounding of money should be your goal if you seek to be long term successful. To give you an example
15% return on average…on $500,000 over ten years is Yearly compounding: 15.000% $2,022,778.87
Take it to the next example 20 years
Yearly compounding: 15.000% $8,183,268.70

This is the power of compounding. The fact is most private investors can not maintain the discipline when they trade themselves and even when they allocate to commodity trading advisors…. Successful commodity trading advisors know what it takes to be long successful.. patience and discipline ( with strong risk and money management). Some of them have exceeded 15% compounded rates of return.

These are just a short list
Abraham Trading Since Inception:1,740.12% Annual RoR:14.81%(VAMI)Inception:Jan 1988
Millburn Commodity Since Inception:6,544.00% Annual RoR:13.90%(VAMI)Inception:Feb 1977
Tactical Investment Since Inception:1,522.22% Annual RoR:18.92%(VAMI)Inception:Apr 1993
Clarke Capital Since Inception: 744.14% Annual RoR:20.26%(VAMI)Inception:Aug 1997

Commodity trading when proper risk management is in place offers one of the best investment potentials. Commodity trading investors have liquidity and transparency like no other investment. If you would want to take your money out of a commodity pool or managed account..usually the longest wait would be 1 month. Compare this to a real estate investment or venture capital fund.

As far as transparency… you can see EVERYTHING in your managed account.

I put my money where my mouth is. Most of my assets are in commodities. I allocate between 2-3% of my net worth per idea. Even our own pool ( which I believe has been the culmination of everything I have learned over the last 15 years) and other trend following strategies…I allocate 3% of my net worth.. I allocate to other commodity trading advisors as well ( 2-3%). My goal is to compound my way to wealth. There will be great years…like last year..and nothing ( so far) like this year. It does not matter.. I have placed myself in the position to benefit. I have compounded money for myself and my family. If I can do it.. so can you if you have the discipline and patience and let compounding in commodity trading & trend following work for you.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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