When looking at global macro investing it is useful to first define it. Macro trading is simply looking across the globe and across asset classes to determine where are the best opportunities on an absolute and risk adjusted basis. If the Ghana stock market looks great then invest there. If US Treasuries look good then trade them. If the Russian Ruble looks like it will be devalued then short it. Basically do not use any artificial constraints and simply invest where the money is.
Many investors get stuck looking at the same market over and over looking for opportunity. Global macro traders look at anything that may give the best return. They look for the biggest bang for their buck on a risk and absolute basis.
Pundits always speak of the benefits of spreading your bets but most of them do a poor job of dispensing advice. They think that 25% in small cap, 25% in mid caps, 25% in large caps, and 25% in bonds is diversifying. The truth is that you are 75% in US stocks and 25% in US bonds most of the time. That is not diversified. To top it off they use index funds which means you will only do as well and as bad as the overall market minus any fees.
The main problem with indexing is as Keynes puts it "in the long run we are all dead." If you have forever then buy and hold is great. Over decades and centuries stock indexes have performed well. But over some 20 year periods they have done absolutely horrid. So let go of that limiting belief and learn a better way to look at things.
Lets look at some of the problems with the by and hold approach. If you buy hold stocks the truth is that you would have suffered negative returns from 1962-1982 and from 1997 to 2008 so far. That doesn't include the depression or inflation which makes it even worse. So unless you are immortal you will need to find a better solution to reach any financial goals.
Buy and holding an index may be even worse then doing nothing. If you had bought the SP500 10 years ago you would be sitting with a zero percent return right now. If that sits well with you then good luck. You would have made more in a savings account with far less volatility and tax consequences. Buy and holding index funds doesn't work in the real world.
Sitting for 10 and even 20 years on negative returns have you down on investing? If you are like most investors you are frustrated and need help. Look at different investment styles that are really different. A new stock picking strategy is not much different then buying an index of stocks. Instead open your eyes to different asset classes and countries and find the best risk to reward opportunities the world over. Global macro trading allows you to see it all.
Many investors get stuck looking at the same market over and over looking for opportunity. Global macro traders look at anything that may give the best return. They look for the biggest bang for their buck on a risk and absolute basis.
Pundits always speak of the benefits of spreading your bets but most of them do a poor job of dispensing advice. They think that 25% in small cap, 25% in mid caps, 25% in large caps, and 25% in bonds is diversifying. The truth is that you are 75% in US stocks and 25% in US bonds most of the time. That is not diversified. To top it off they use index funds which means you will only do as well and as bad as the overall market minus any fees.
The main problem with indexing is as Keynes puts it "in the long run we are all dead." If you have forever then buy and hold is great. Over decades and centuries stock indexes have performed well. But over some 20 year periods they have done absolutely horrid. So let go of that limiting belief and learn a better way to look at things.
Lets look at some of the problems with the by and hold approach. If you buy hold stocks the truth is that you would have suffered negative returns from 1962-1982 and from 1997 to 2008 so far. That doesn't include the depression or inflation which makes it even worse. So unless you are immortal you will need to find a better solution to reach any financial goals.
Buy and holding an index may be even worse then doing nothing. If you had bought the SP500 10 years ago you would be sitting with a zero percent return right now. If that sits well with you then good luck. You would have made more in a savings account with far less volatility and tax consequences. Buy and holding index funds doesn't work in the real world.
Sitting for 10 and even 20 years on negative returns have you down on investing? If you are like most investors you are frustrated and need help. Look at different investment styles that are really different. A new stock picking strategy is not much different then buying an index of stocks. Instead open your eyes to different asset classes and countries and find the best risk to reward opportunities the world over. Global macro trading allows you to see it all.
About the Author:
Jesse helps people find different Global Macro Trading opportunities. The Macro Trader is a research firm that writes a weekly newsletter focused on actionable macro trading opportunities using ETF's.
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