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ZuluDefining an alternative investment: an investment that is not among the three traditional types: equities, bonds or mutual funds is considered and alternative investments. Most alternative investment assets are held by institutional traders or accredited, high-net-worth people due to their complex nature of the investment. Alternative opportunities include hedge funds, Forex managed accounts, property, and exchange-traded futures contracts. Alternative investments aren’t correlated with the world stock markets which makes them highly sought after by investors seeking returns uncorrelated to traditional investments. Alternative opportunities are preferred due to the fact their returns possess a low correlation with the worlds major markets. Due to this, many sophisticated investors, such as banks and endowments, have started to allocate a part of their investment portfolios to alternative investment opportunities. While a small investor might not have had the opportunity to invest in alternative investments in the past, they can know to invest in individually managed Forex accounts.
Correlation And Forex Investments
Correlation and Forex funds investments must be well understood prior to making an investment. The term “correlation” is used to describe the relationship between two Forex funds investments. Correlation will define how to investments are related to each other. Correlation is measured by calculating the correlation coefficient. The correlation coefficient will always be a ‐1.0 to +1.0. If the correlation coefficient is a negative number, the relationship between the two investments is negative; i.e., if one investment moves up, the other investment moves down. A positive correlation coefficient is a positive number the investments will move in the same direction. If the correlation coefficient is zero, this would mean the two investments are not correlated and an investor can expect them not to move together over time. Ideally and investors portfolio should have a correlation coefficient of close to zero as possible. Forex investment funds will generally have a correlation coefficient very close to zero when compared to other investments.
Judging the Performance of a Forex Managed Account Trader: Is the Track Record the Only Thing that Matters?
Seeking out positive returns.
Investors should take particular note of the Forex manager record of performance; however, this in itself should not be the only reason for choosing a specific Forex trading advisor. The disclosure document should spell out the Forex managed account manager market approach and trading style. This information should be carefully reviewed along with the track record when the investor chooses a particular Forex trader. Strong performance in the short term may be nothing more than good fortune. Positive performance over a long time., and over many trades, may indicate that the trader’s philosophy and style are more robust than his competitors. This is especially true if the track record includes periods of bull, bear, and flat trading ranges. It is important to remember that past performance is not necessarily indicative of future results.
A few metrics to take careful note of when reviewing a track record:
- How long is the track record?
- Is it skill or is the fund manager lucky?
- Are the results sustainable?
- Worst peak to valley drawdown: Could you still make money even if the manager has a positive return for the year?
- Assets under management: Is the manager trading and an insignificant amount of money, or has his track record proved to be scalable and sustainable?
