Losing Money Even when the Money Manager or Commodity Trading Advisor Is Profitable?

What, how can that be? You are telling me it is possible to lose money even with a manager who over long periods is profitable?


I have seen it time and time again in my career now spanning close to 19 years. First of all trading is tough. There are no gurus or magic managers. Every manager has periods in which they lose money or go through draw downs. The way investors lose money even with these unique & profitable managers may happen with the following mistakes:
• It is Very Easy to psychologically to invest when a manager is having a good run. However as much as we are dealing with uncertainty buying drawdowns of managers who have gone through various cycles over decades can be a prudent concept.
• Too many investors “ Buy the Highs and Sell the Lows”
• It is Very Easy to allocate to a Large Manager with Billions of Dollar under management ( but they are not perfect and can lose money also)

Simple Rules to Consider
• Managers who have experienced various market conditions over the years
• Liquid & Transparent- Managed Accounts
• Set a goal of 15% CAGR ( Compounded Annual Growth Rate)
• Doing the Uncomfortable: Buying the Drawdown
• Performing Strong Due Diligence
• Allocating no more than 5% of assets in anyone manager
• Accepting there is nothing perfect, no magic manager and even following these rules there still will be loses!
• Past Performance is not Necessarily Indicative of Future Performance

Be Sociable, Share!

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>