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What Rate of Investment Return Are You Seeking This Year?

InvestorEducation / Investing 2009 Sep 11, 2009 - 06:25 AM GMT

By: Andrew_Abraham


All too many investors have over estimated the rate of return they are looking for. Many times they take on way too much risk without realizing the implications. Risk and return is a double edged sword. The question I always ask or think…is how much risk do I need to put on or invest for x% rate of return.

It is sad that even the so called experts do not realize this.

Too often being risk aware has been frowned upon…but an interesting point is after years and years of success the endowment funds of Harvard and Yale have seen losses come close to 40% of their portfolio. Putting this into dollar terms Harvard’s funds fell from $36 Billion to $26 Billion. If the experts of Harvard and Yale have had these types of losses what is to be with smaller investors or simply me and you (read on)? Harvard & Yale experienced these losses because they were in investments that were not liquid. All too many Hedge Fund investors have realized this year they can not get their money out of their perspective investments.

All one has to do is look at Cerberus, the $7 billion dollar fund with their problems in the auto industry. It seems that no one has ideas on how to invest currently. More so, investors are afraid of having their money in the banks. I have seen investors from China to Israel think they way to protect their assets is to buy real estate. However the problem is they are over paying for the real estate. They are making the mistake as Harvard and Yale by buying into an illiquid asset. It is one thing to buy real estate under valued and actually this is a good idea however most are buying at currently inflated valuations.

Seeing all of this first hand gives me the perspective and reinforces my thoughts regarding commodity trading and managed futures. The advantages are numerous. What other type of investment lets me have absolute liquidity? How about none! If I have a multi million dollar portfolio or even hundred million I can liquidate within a max period of time of an hour. Try selling your real estate when you want to. More so.. I do not have counter party risk. All contracts are traded on regulated exchanges.

More so Commodity trading advisors are heavily regulated and monitored by the NFA and the CFTC. More so, If you have a managed account the commodity trading advisor does not have access to your cash, the commodity trading advisor only has the right to buy or sell. More so, when investing in trend following in managed futures one has the potential exposure to virtually every product that touches our daily existence. There are always bull and bear markets. Many commodity trading advisors made money last month in Sugar just by following the trend. None were probably sugar experts. Rather there was a price move and they took a bet to see if the trend would continue. I am very thankful that I am in the commodity markets world and understand the need for liquidity. I know that I have it with commodity trading.

I am also very aware commodity trading is not simple and there are many times there are draw downs and negative periods. I am not naive to the fact that most of the time commodity trading is a struggle and very difficult. However I have and try to instill in my clients the goal of 10-15% over time ( actually long periods of time). If I can achieve these goals I can compound my way to wealth. I am not reaching for the stars.

I allocate to other commodity trading advisors that think the way I think about risk. I do not allocate more than 5% per idea or commodity trading advisor. In my commodity trading I try not to risk more than 1% per trade…5% risk per sector…and 13% open trade equity. If you want to succeed long term in the commodity markets or even just investing… Think in terms of liquidity…risk …and make yourself available for the opportunities when they become present. Play defense and potentially the rewards of compounding your way to wealth can be yours

Andrew Abraham

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 ( Contact: (

© 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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