Recent weeks show why it is a good idea that we balance any investment fund correctly with equities, commodities, bonds and cash.
Easy to say so after the event. (Check-out an earlier blog post ‘how to invest‘).
I realise that to have some investment in UK government bonds (treasury bonds if the USA), rather than all equity, when ‘bonds’ are making a slow decline and shares are soaring is hard to do. But that is precisely the time to do it.
Bonds act as a type of hedge against a portfolio of shares. But getting the split correct (equities/commodities/bonds/cash) is also advantageous.
Also, put 10% to 15% of your stash into a short-term trading fund. (The Slow Trader fund is only open to current investors).
What do I mean by short-term? Anything from high-frequency trading (HFT) to a daily chart fund. The HFT are computer algorithms trading in/out at as low as a part of a second and ‘daily’ chart funds are more sedate.
Our trading (Slow Trader) is somewhere in the middle as we currently favour the one-hour chart as our anchor timeframe.
If it’s HFT for you, then be careful which HFT you chose. They can be expensive, and I was surprised to learn that historically expect over 50% of such enterprises in operation at the moment to go bust.
But what is the advantage of having a short-term trading deal in your range of investments?
Take a look below at the weekly chart of the Euro vs US dollar with its massive reversals over the last couple of months. (Equities and commodities paint a similar if not worse medium-term picture).
In all likelihood, this would have eliminated a medium-term investor but provided opportunities for a capable short-term trader.