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  • Top Articles - Managed Futures: A Cure for 'Buy-and-Hold' Investor Strategies

    Does it make good sense to buy a truck load of stocks when sourpuss pundits are negative about the economy?

    Stock investor and author Ken Fisher thinks so. In his new book The Only Three Questions That Count, Fisher preaches against listening to th
    According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
    e gaggle of grousers who complain that the United States is on the verge of monetary self-immolation.

    Instead, Fisher uses the collective voices as a kind of technical indicator: loud, shrill cautionary declarations mean buy, buy, buy.

    Boiled down, the mes
    ; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

    Examples of combination products may in
    sage Fisher and Forbes publisher Rich Karlgaard, whose column in the January 29, 2007 issues of his magazine features Fisher’s book, may be this: Don’t listen to what might happen. Watch what the markets are actually doing.

    Fisher and Karlgaard may have g
    lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

    od reason to crow, if the record highs in the Dow Jones Index mean anything. In spite of growing deficits and a bloated war budget the stock market closed strong in 2006 and has started the New Year in fine style. Who can argue with success?


    Me.

    here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

    I too believe it makes more sense to watch the behavior of price rather than be influenced by the opinions of market sages.

    But what are long-term investors to do when dramatic events suddenly reverse market gains? Resist panic, yes. Yet the tech stock
    d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

    Combination pro
    downturn in 2000 is a bitter reminder of the inherent risk in stubborn buy-and-hold strategies.

    There is a method of investing that allows you to enjoy the long-term gains of a trending market, while at the same time having the flexibility to liquidate sho
    ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
    t-term positions without serious tax liabilities. (If you buy and sell a stock within 12 months you’ll be taxed at a higher rate than those stocks that are liquidated after a year or more of ownership.)

    The method I’m referring to is managed futures.

    Man
    easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
    aged futures are not new. Investment managers have been using managed futures for more than 30 years to diversify and stabilize portfolios. In recent years, this practice has spread to pension funds, endowments, trusts and banks.

    Managed futures have grow
    nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
    n as portfolio managers have become more acquainted with futures contracts. Also, investors have insisted on greater access to world markets, with more exposure to non-financial sectors, such as agriculture and precious metals.

    It is estimated that manage
    and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
    futures reached about $150 billion in the second quarter of 2006 – a 17.62% increase in assets over the previous 12 months. One reason for this incredible growth is independent studies that show managed futures offer far too many benefits for wise investor
    ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
    s to ignore:

    -
    Reduced portfolio volatility risk
    -
    Possible enhanced portfolio returns
    -
    Opportunity for gains in any economic environment – and “hard” times are often very good for commodities
    -
    Easy access to global mark
    ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

    Following aspects would a
    ets


    Perhaps one of the most significant studies of managed futures was released in 2004 by the Yale International Center for Finance. Authors Gary Gorton and K. Geert Rouwenhorst wrote Facts and Fantasies About Commodity Futures after creating their o
    dd to the challenges in developing combination products:

    Which markets to tap where the combination products can do fairly well?
    Which combination prod
    n commodities index based on returns between July 1959 and March 2004. The authors discovered that between 1962 and 2003, “the cumulative performance of futures has been triple the cumulative performance of ‘matching’ equities.”

    The term ‘matching’ equit
    cts are meaningful and rational?
    Which therapeutic categories to select?
    Which Combinations can address unmet needs of the patients?
    Do combin
    ies refers to stocks that are related to commodities. Many investors buy oil and food companies, for example, rather than futures assuming stocks are the safer vehicle.

    But that fantasy is only one of many that Gorton and Rouwenhorst debunk with facts:

    -
    tions increase the patient compliance?
    What would be the developing cost?
    How to tackle the risks encountered during combination product developmen

    Volatility of the futures they studied was slightly below that of the S& P 500.
    -
    Equities have more downside risk than commodities. A stock can shrink to nothing very fast. But commodities like corn, sugar and oil, for example, will always
    t?

    As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
    etain value.
    -
    Commodity returns were “negatively correlated” with equity and bond returns. This means that commodities may do very well in the event of a stock market downturn or low interest rates.


    Finding the right managed futures fund
    ping new procedures for reviewing their safety, efficacy and quality.

    Professional from academic institutions, pharmaceutical industries, health care indust
    can be tricky for amateurs, because there are so many to choose from, and many claim to offer excellent gains.

    To assist those investors who are eager to enhance their portfolios, George Mahshigian, a 30-year veteran of the markets, founded Lions Futures M
    y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
    anagement, Inc., a research and advisory brokerage firm in Van Nuys, CA.

    Mahshigian has developed a system for analyzing professional money managers known as commodity trading advisors (CTAs). His system is designed to stop investors from making a common m
    .

    As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
    stake: choosing a money manager based only on annual returns.

    Mahshigian believes it is far wiser to focus on risk management because investors are more likely to stay with a fund that doesn’t have dramatic dips on its way to making great gains.

    Also, sin
    elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

    Companies that provide selfless information through particip
    ce he knows that individuals often don’t do their homework, Mahshigian’s firm does it for them: Lions Futures Management makes CTAs jump through hoops proving their trading records are accurate, and back-office management techniques are sound.

    Copyright 200


    tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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