What mistakes do investors sometimes make regarding managed futures?
There are three basic ones. First, because of the risk, futures trading in any form may not be appropriate for a given person, even if a managed account seems more attractive than do-it-yourself trading. Unless you’re comfortable with the risk level and feel it’s appropriate for you, it would be prudent not to invest at all. Second, an investor might select an advisor based solely on whether the advisor is currently hot. A prudent investor will select a CTA based on the money management skills and a trading style that has been employed in the past to achieve consistent returns. Lastly, investors engage in “account jumping,” or prematurely closing accounts out of panic and fear when experiencing a period of flat returns or drawdowns. By doing this, the investor loses the opportunity to recover from those temporary losses in equity and benefit from longer-term returns.
