9 Misconceptions about Managed Futures 5.00 / 5 (100.00%) 1 vote

Some investment experts claim that the best thing you can do now is to invest in managed futures. There are many theories about this investment option but there are many inconsistencies too. Personally, I have discovered 9 misconceptions about managed futures and these misconceptions are discussed below.

1. It worked in the past so it must work now

This is one of the most popular misconceptions about managed futures. Those who push this theory claim that history has a habit of repeating itself. That may be true but history does not ever repeat itself in exactly the same way. In any case, we are talking about a dynamic market here. No two markets can ever be the same so what worked in the past may not necessarily work in future.

2. Managed futures is the ultimate win-win

Nothing can be further from the truth. Like any other investment, some people will make profit, some will lose money and some will just break even. In effect, managed futures can be a win-win, a lose-lose or a win-lose.

3. Many people invest in it so it must be good

If you keep your eyes wide open, you will notice that the numbers do not mean anything. If many people take the wrong option, this will not make that option the right one. Many people can invest in good options and many people can invest in bad options. It is not the numbers that determine a profitable venture.

4. Managed futures help you diversify

This is not true because you can diversify in different ways. Buy stocks in different industries and invest in mutual funds. These are just two ways to diversify your portfolio and there are other ways to diversify.

5. The managed futures manager knows it all

An investment manager is not a magician and the managed futures manager does not know it all. These managers are human and they make mistakes. When they make mistakes, you lose money.

6. Managed futures have attractive returns

The problem with this statement is that it is ambiguous. Different people have different meanings of what attractive returns mean. What the manager considers attractive may not be attractive to the client.

7. Managed futures can protect you from a stock market crash

When the market crashes, your investment may be reduced to worthless pieces of paper. This applies to stocks and bonds. It also applies to an investment called managed futures.

8. Managed futures are closely monitored and regulated

In many instances, this is not true. Managed futures operators have a lot of wriggle-room. For one thing, their accounts are not audited as often as they should be. Again, some managers may invest in high-risk ventures to make money for themselves and their clients.

9. Managed futures managers go by the book

The problem here is that nobody seems to know the book futures managers are supposed to use. For all you know, these people may be investing your capital in sports betting. If they win, everybody is happy but what if they lose?

There is nothing wrong with investing in managed futures because you can make a lot of money with this option. The thing is that there at least 9 misconceptions about managed futures and these misconceptions have to be corrected.