V.6:1 (28-30): Which Money Manager? by Charles Milmoe
Product Description
Which Money Manager?
by Charles Milmoe
None can answer the question absolutely, but there is a method of determining if your money manager has even a chance of making money for you next year. It requires a small amount of high school math and a desire to select a manager intelligently rather than emotionally.
Many people select futures advisors based upon emotion (greed and fear); but, the failure rate in futures trading is so high that the prudent use of the following formula can help you objectively select and evaluate a futures and futures options money manager.
The first requirement is that the advisor or the system has been profitable for at least three years. Most major brokerage firms insist on this, however, sometimes even they make exceptions. But you, as an individual investor, should never make an exception to this rule. If you like a particular advisor and/or a trading idea, have the patience to watch until the track record is at least three years old. You will protect yourself from many financial disasters by exercising this patience. This patience also will contribute substantially to your future success once you actually invest with a money manager.
The second consideration should be that the track record has been profitable during both an inflationary period ( 1970 1980) and a deflationary period (1981 - present). Purely technical system advisors may suggest this should not be a factor, but analysis shows how poorly many trend followers have done in the past four years. Either their systems aren't purely technical and have a bullish bias, or their systems need slowly developing trends to be profitable. However, prices often fall precipitously without gradual warning periods.
None can answer the question absolutely, but there is a method of determining if your money manager has even a chance of making money for you next year. It requires a small amount of high school math and a desire to select a manager intelligently rather than emotionally.
Many people select futures advisors based upon emotion (greed and fear); but, the failure rate in futures trading is so high that the prudent use of the following formula can help you objectively select and evaluate a futures and futures options money manager.
The first requirement is that the advisor or the system has been profitable for at least three years. Most major brokerage firms insist on this, however, sometimes even they make exceptions. But you, as an individual investor, should never make an exception to this rule. If you like a particular advisor and/or a trading idea, have the patience to watch until the track record is at least three years old. You will protect yourself from many financial disasters by exercising this patience. This patience also will contribute substantially to your future success once you actually invest with a money manager.
The second consideration should be that the track record has been profitable during both an inflationary period ( 1970 1980) and a deflationary period (1981 - present). Purely technical system advisors may suggest this should not be a factor, but analysis shows how poorly many trend followers have done in the past four years. Either their systems aren't purely technical and have a bullish bias, or their systems need slowly developing trends to be profitable. However, prices often fall precipitously without gradual warning periods.
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