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What are the Advantages of Investing in Managed Futures?

There are many advantages of investing in Managed futures. It allows you to go long or short with utmost ease. Other benefits include generating profits without concern for market direction, lower volatility, and the chance of building a global portfolio. There are many more reasons for investing in it.

What are Managed Futures?

This type of investment involves professional funds managers who are referred to as commodity trading advisors. The advisors will manage client assets based on global futures markets. They take positions according to profit expectations. Managed futures This asset class is considered as an important investment option that increases the returns and reduces portfolio volatility.

Key Advantages

Some of the key advantages of investing in it are as follows:

  • It has the potential to reduce your overall portfolio risk
  • It offers a wider opportunity to profit in diverse investments
  • The profit/loss potential is not related to traditional investment movements like stocks/bonds
  • You can profit from Managed futures in different economic conditions

With this type of investment, using absolute return strategies allow advisors to generate returns no matter what the market direction is. Your advisor can use a wide range of investment instrument tools to boost your profits. It is best to treat these vehicles as long-term investments. It is best to add it to a traditional portfolio for a broader diversification.

Tax Benefits

The profits generated from Managed futures are taxed in a unique way. They are treated as if they have:

  • 40% short-term capital gains
  • 60% long-term capital gains

The maximum federal income tax on long-term capital gains is only 15%. And the same tax on short-term capital gains is 35%. There are no time limitations on this investment as to when it can qualify for long-term capital gains tax. On the other hand, other investments should be held for a minimum of 1 year before they fall under this lower tax bracket.

These vehicles have shown higher consistency in market cycles. With Managed futures, your advisors can employ different strategies, different trading time frames, and trade more markets compared to traditional investments. There is also increased transparency and liquidity. It minimizes the need for tracking single investments by getting your account traded by the advisor. You can have almost all your portfolios benefit from diversification. This means that you can generate higher returns while keeping the risks low.  

Futures trading involves risk of loss and is not suitable for all investors.