Among the ten asset classes we have cash, equities, fixed income, commodities, currencies, real estate, private equity, venture capital, collectibles, and statistical arbitrage. Obviously not all of these are easily accessible by most retail investors but you can still get into five or more.
Cash is the first asset on the list. While technically a currency we look at it as more of a place of last resort. You earn a bit of interest on it but basically you only use it when you can find another place to put your money to work for a higher return.
Stocks are next. Stocks represent ownership in a company. When we look at stocks we look at them across the globe. That means domestic, foreign, and even emerging market stocks are included. Obviously we look at them different depending upon where they are located but they are still ownership in companies and in this day and age are all part of the global economy.
Bonds also known as fixed income are simply loans to governments and corporations. In return for the loan you get interest payments. Most global macro traders look at US government, foreign government, and corporate bonds when looking for a fixed income trade. By looking at multiple sub classes we have more opportunities for great risk to reward trades.
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.
Finally we get to currencies. This is actually the largest asset class out there and gives some of the best trading opportunities. If you have an opinion on any country you can buy or short the currency and try and make money.
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.
Cash is the first asset on the list. While technically a currency we look at it as more of a place of last resort. You earn a bit of interest on it but basically you only use it when you can find another place to put your money to work for a higher return.
Stocks are next. Stocks represent ownership in a company. When we look at stocks we look at them across the globe. That means domestic, foreign, and even emerging market stocks are included. Obviously we look at them different depending upon where they are located but they are still ownership in companies and in this day and age are all part of the global economy.
Bonds also known as fixed income are simply loans to governments and corporations. In return for the loan you get interest payments. Most global macro traders look at US government, foreign government, and corporate bonds when looking for a fixed income trade. By looking at multiple sub classes we have more opportunities for great risk to reward trades.
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.
Finally we get to currencies. This is actually the largest asset class out there and gives some of the best trading opportunities. If you have an opinion on any country you can buy or short the currency and try and make money.
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.
About the Author:
The Macro Trader helps investors find great Global Macro Trader opportunities. Volatility Trading is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.
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