Asset Allocation: Stocks, Bonds, Futures
by K.D. Angle
Investment survival depends on an investor's ability to adapt to the market. Is it possible to develop a
strategy that performs under all conditions, whether inflation or deflation, recession or prosperity? K.D.
Angle, futures portfolio manager and publisher of "The Timing Device" newsletter, says yes in this, his
first STOCKS & COMMODITIES appearance. Take a look.
Is it possible to develop an investment strategy that would perform under all economic conditions?
After all, I reasoned, there are times when major investment vehicles would outperform others. I decided
to find out if I could formulate such a strategy in a hypothetical portfolio.
But first, I had to clarify the parameters involved by setting down the investment vehicles to use in the
portfolio. When I refer to major investment vehicles, I specifically refer to: stocks; interest income such
as Treasury bonds or Treasury bills; and a third investment class known as a trading vehicle, which
includes markets that do not correlate either negatively or positively with stock or interest income
vehicles. Markets such as currencies, financials or even basic commodities can add diversity to the
Under current conditions, most of the markets in the trading vehicle investment class can best be traded
on margin in futures exchanges. By and large, the markets utilized in the trading vehicle are futures
markets traded on margin, which if properly employed do not necessarily add volatility to overall
portfolio performance, as most investors assume. On the contrary; using noncorrelative markets in thisallocation approach actually reduces the downside volatility in the performance curve of the portfolio to
minimum and can increase overall profitability as well.