Asset Classes for Global Macro Trading
Most people already own stocks and bonds but there are eight other common asset classes. Stocks, bonds, commodities, currencies, private equity, venture capital, real estate, statistical arbitrage, cash, and even collectibles like art can be traded and invested in.
Cash is considered the asset class of last resort. You go to cash when you don't have anywhere else to put your money. Remember that we want great risk to reward situations, so when we can't find one we sit out in cash.
Stocks are next. Stocks represent ownership in a company. When we look at stocks we look at them across the globe. That means domestic, foreign, and even emerging market stocks are included. Obviously we look at them different depending upon where they are located but they are still ownership in companies and in this day and age are all part of the global economy.
Bonds also known as fixed income are simply loans to governments and corporations. In return for the loan you get interest payments. Most global macro traders look at US government, foreign government, and corporate bonds when looking for a fixed income trade. By looking at multiple sub classes we have more opportunities for great risk to reward trades.
Next on the list are commodities. Commodities include precious metals, base metals, energy complex, agricultural goods, and livestock. Basically global macro trades lumber, oil, gold, etc if the risk to reward is in place.
The largest asset class is that of currencies. Currencies have long been one of the primary trading assets for macro traders. If you have an opinion on one country versus another then you have a basis for a trade. If the reward outweighs the risk then you can have another asset class to trade.
So what of the other assets classes? Well they tend to be less liquid so you need a lot of money to trade them well. For instance you can make a lot with real estate but you need to have a long time horizon. Same goes for art, venture capital, and private equity. You can trade this stuff but it takes a different time frame then most investors are used to. - 23159
Cash is considered the asset class of last resort. You go to cash when you don't have anywhere else to put your money. Remember that we want great risk to reward situations, so when we can't find one we sit out in cash.
Stocks are next. Stocks represent ownership in a company. When we look at stocks we look at them across the globe. That means domestic, foreign, and even emerging market stocks are included. Obviously we look at them different depending upon where they are located but they are still ownership in companies and in this day and age are all part of the global economy.
Bonds also known as fixed income are simply loans to governments and corporations. In return for the loan you get interest payments. Most global macro traders look at US government, foreign government, and corporate bonds when looking for a fixed income trade. By looking at multiple sub classes we have more opportunities for great risk to reward trades.
Next on the list are commodities. Commodities include precious metals, base metals, energy complex, agricultural goods, and livestock. Basically global macro trades lumber, oil, gold, etc if the risk to reward is in place.
The largest asset class is that of currencies. Currencies have long been one of the primary trading assets for macro traders. If you have an opinion on one country versus another then you have a basis for a trade. If the reward outweighs the risk then you can have another asset class to trade.
So what of the other assets classes? Well they tend to be less liquid so you need a lot of money to trade them well. For instance you can make a lot with real estate but you need to have a long time horizon. Same goes for art, venture capital, and private equity. You can trade this stuff but it takes a different time frame then most investors are used to. - 23159
About the Author:
The Macro Trader helps investors find great Global Macro Investing opportunities. Mean Reversion is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.
posted by X - Men @ 1:32 AM
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