The Giant Of Marathon (1960)

Buy and Hold Versus Commodity Futures Trading

ooking 20 year in the future would be better off with a buy and hold strategy or commodity futures trading (trend following)? All seem to want the short cut that is why they are watching CNBC or Bloomberg. They are seeking the holy grail.. ( which in my terms is only Patience…Discipline and trend following a basket of commodities). So many investors have started to wake up and realize that possibly that buy and hold is more like buy and hope. The buy and hope crowd has been brainwashed by the stock market industry that if they have patience and stay with the market they will be rewarded. The key is how much time to do they to invest. Not saying we could be in an early stage of a depression…but in 1932 the bottom of the depression it took 25 years to get to break even. As well there is the period of the 1960s nothing happened at all in the market or 1973-74 it only took 12 years to get to break even. I honestly do not have that time. I try to compound my money and more so compound my way to wealth. Don’t get me wrong commodity futures trading (trend following) is not easy. Actually it is the hardest …yet easiest thing to do. Most of the time nothing happens and all of a sudden, when so many are on the verge of giving up, there is a massive move in some commodity or currency. That is how it works. More so in commodity futures trading (trend following) only simple ideas can hold up over the course of time.
Even after the Stock market crash in the spring of 2000 and the current stock market crash..the utter failure of buy and hold should be very clear to people. Just look at their mutual fund statements. Why do investors buy into the line ” Buy the Dips” or ” Buy and hold for the long term”. There was an article in the WSJ today discussing buy and hold king Warren Buffet. To quote the WSJ, “Mr. Buffett liked oil giant ConocoPhillips (COP) enough to invest $7 billion in the stock through the end of last year, at an average price of $82.55, according to the Berkshire Hathaway annual report. Anyone buying today can get it for about $41.” There were mentioned many more examples. My simple example is Benjamin Graham who basically imploded in the depression.
The fact again is commodity futures trading (trend following) a basket of commodities sometimes can be upsetting or look that good but it is better than anything else out there. All one needs to do is look at the long term record of many commodity trading advisors that have compounded money for decades at rates of 15-20%. It is not a smooth run at times.. there can be extended long draw downs and low returns and all of a sudden a year of 70% returns.

I am a commodity futures trader (utilizes Trend Following) because my simple goal is to compound my way to wealth. I know it will continue to be a long process or a marathon. I do not hope or have blind faith. I utilize a commodity futures trading strategy with strong money management and risk controls as well as allocate to other commodity trading advisors that understand risk. My portfolio is not on autopilot and hope for the best at my time of retirement ( which I will probably never retire as I love commodity futures trading).

Andrew Abraham
www.myinvestorsplace.com

About the Author

Andrew has been in the financial arena since 1990. He is a Registered Investment Advisor ad affiliate of Abraham Bedick Capital. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew’s major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

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