Goldman Sachs advises clients to get out of stocks

Investors need to be aware of the major factors affecting their investment portfolio. By not having the proper diversification in their portfolio investors can be subject to large downturns in their portfolio.

Chicago, IL (prHWY.com) August 25, 2012 - Goldman Sachs is a highly respectable and maybe the most powerful investment bank on the street. Their Chief of U.S. equities has sent a letter to investors that they need to get out of U.S. equities. With the S&P 500 above 1400, David Kostin believes it will fall at least 150 points to below 1250 before the November elections if congress does not address the fiscal cliff. Almost a year ago when the U.S Congress was unable to come to an agreement that satisfied the entire issue and the S&P dropped 11 percent. David Kostin is predicting a drop of 12% in the next three months. This does not seem like an unlikely prediction given what we have seen over the past year. Congress does not seem to agree on much of anything and that is perhaps the reasoning behind their low approval rating. For investors this would mean another hit to their investment portfolios. The majority of individual investors with retirement accounts does not track the market on a daily basis and usually do not move their money until it is time to draw down on their account once they are retired. Investors could hedge against a downturn in their portfolio by diversifying into a non-correlated asset class such as managed futures.

Managed futures are an investment vehicle that allows investors without futures experience or time to trade their own account the ability to get exposure to the commodity markets. An investor can choose a managed futures account based on commodity strategy or a futures strategy. A commodity strategy would be a specific market they would like to exposure too. For example an investor could get exposure to energies, interest rates, currencies, indices, grains, softs, or livestock. A futures strategy would be the type of trade the manager places. They could trade futures, options, or spreads, which are made up of different futures or options contracts. Investors could also get exposure to the commodity markets through a number of different commodity trading companies. Commodity trading companies could be either a Commodity trading advisor or a commodity pool. Both manage money for investors in the futures market and fall under the category of managed futures.

By having a diversified portfolio investors can limit their exposure to one specific asset class. By having exposure to the commodity markets investors could actually profit in their futures account while their stock portfolio suffers losses. A properly diversified portfolio means having more than stocks and bonds. Alternative asset classes include hedge funds, private equity and managed futures. These asset classes implore strategies that affected differently than their stock or bond portfolio during different market conditions. By having exposure to one of these asset classes an investment portfolio can have smaller drawdowns and less volatility while ultimately experiencing larger overall returns in the long run. It is true that these asset classes are much riskier and should only make up a small portion of a portfolio perhaps 20%. To learn more on the subject of diversified portfolio investors can research Modern Portfolio Theory or speak with a futures broker. For more details please log on to [url=http://www.cedarassetmanagementllc.com]www.cedarassetmanagementllc.com

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Tag Words: commodity strategy, futures strategy

Categories: Business

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