Global Macro Trading and Asset Class Diversification

By Bruce Jones

There are ten asset classes that are regularly traded by global macro investors. Real estate, venture capital, equities, currencies, commodities, cash, bonds, collectibles, statistical arbitrage, and private equity. While a few of these are tough for individual investors to get into, the majority are easily accessible.

The first asset class is cash. Cash is the safe haven when we can't find any other good trading opportunities. For instance if stocks look like junk and bonds are no good you will likely have some money in cash as you wait for a good opportunity. So while its really a currency we look at cash as a separate asset class.

Stocks are next and they are also probably the most followed asset class. We have all heard of the Dow Jones and the NASDAQ. While stocks are a great and exciting asset class they aren't the only game in town.

Fixed income, also known as bonds represent loans to a government or business. When you loan money you receive interest in exchange. Anyways most global macro traders trade US government, foreign government, corporate, and even low grade corporate bonds. They have different drivers so they provide more trading opportunities.

Commodities are another hot spot in the macro arsenal of asset classes. While the term is broad the trading is even broader as you can trade energy, agricultural products, livestock, metals, and even precious metals. If you can pick it up or eat it you can trade it. This is a good thing as it gives us more potential trade opportunities.

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. - 23162

About the Author:

The Macro Trader helps investors find great Global Macro Trading opportunities. Tactical Asset Allocation is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.