While Precious Metals, specifically Gold and Silver have appreciated tremendously since the end of 2015, they aren’t the only Futures Contracts with significant gains. As seen in the Table below, Soybeans (as represented by ZSN6, the July 2016 Soybeans Contract) have experienced an increase in excess of 18% since December 31st. If you are fortunate enough to have an adequate amount of investable assets, it is important to be diversified.
Although diversification is essential for most portfolios, it is unlikely that you included Soybeans in your group of assets. Some asset classes that you may have included are Metals, Grains, Soft Commodities, Oil, Equities and Real Estate (in the form of Real Estate Investment Trusts) in an attempt to gain diversification. Investing in a broad base of assets like this can be expensive and Trading Futures Contracts is not as simple as purchasing an Equity Index like SPY (SPDR S&P 500 Trust) or a Real Estate Investment Trust such as VNQ (Vanguard REIT ETF) or IYR (IShares US RE ETF). Both ETFs are shown in the Table below with returns that do not include the dividends of greater than 4% annually. If you have any difficulty understanding the analysis in our articles, contact us.
While occasionally an investor or trader will take a long-term ride on the ascension of an investment; all too often it is incredibly difficult to do so. For those with significant wealth it was typically accumulated by investing in a single equity held for a long period of time or investments in real estate with a long-term outlook. In the Futures arena, the greatest accumulation of wealth that I have seen was not made by the trading of Futures Contracts on the floor of the Exchange, which for those who were excellent traders was highly profitable, but for those that retained Memberships on the Exchange.
For example, there were Members of the New York Mercantile Exchange, who, through their long-term accumulation of Memberships in the Exchange were able to turn their comparatively small investments into tens of millions of dollars through the growth of Oil Trading and the Purchase of the Exchange by the Chicago Mercantile Exchange. This confluence of events changed the lives of excellent traders into wealthy shareholders of a Publicly Traded Company. Unfortunately, for those who were used to making their living on the floor of the New York Mercantile Exchange, but were not “Seat Holders” or “Members” of the Exchange, computerized trading replaced open-outcry markets and their livelihood was replaced by a new marketplace dominated by computerized trading and algorithms.
Listed in the Table below, compiled at 4:00 PM ET on 5-11-2016, are the returns of a multitude of instruments since December 31st. There is no secret to increasing assets over the long-term. Consistent long-term investments in Equities and Real Estate tend to be quite successful. For those that are not exposed to vehicles such as physical Real Estate or start-up corporations, long-term diversified investments are an excellent approach to building wealth. All you have to do is make the investments (unfortunately, for most Americans, that is the greatest challenge). For those that Trade Options Contracts, the key is getting the best value possible when you are exposing a portion of your investments towards more speculative trading activity.
Options trading involves significant risk and is not suitable for every investor. The information is obtained from sources believed to be reliable, but is in no way guaranteed. Past results are not indicative of future results.