The Investment Game Plan
Once a CTA is selected based on JUSTIFIABLE CONFIDENCE, the investor is now ready to develop an INVESTMENT GAME PLAN.
We Believe the INVESTMENT GAME PLAN should consist of the following:
- Most importantly, only risk capital should be utilized.
- Envisions a drawdown
cutoff point of 50% or 10% greater than the largest historical
drawdown the CTA has ever experienced. Close the managed account
only if those levels are reached. If an investor isn't prepared
to adhere to his guideline, we believe he or she is not suitable for
a managed account.
- Have realistic
expectations. The average performance of the Dow over
approximately the past century has been approximately 10%-11%. A CTA who can
provide you average annual returns of 20% per year over a three-year
period is outperforming the Dow's average approximately two-fold!
- Accept drawdowns and
flat performance periods as inescapable parts of speculation.
- Look at the big picture,
not the meaningless episodes. Evaluate performance over a three-year
average (big picture) not week to week or month to month.
Now that a CTA has been
chosen by the investor, not on emotion but rather on JUSTIFIABLE
CONFIDENCE with a specific INVESTMENT GAME PLAN he or she
should be psychologically prepared to weather the trials and
tribulations that are inherent in speculative investments.
Next: Questions & Answers
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