Dear Dave Ramsey…

Dave Ramsey

Dave Ramsey is well known for giving out financial advice that involves minimizing risk in all ways, shapes and forms- in particular as it relates to consumer credit. Unfortunately, this time around, it appears as though he got in over his head while responding to a reader’s query:

Dear Dave,

My broker has recommended a managed futures fund. I’ve never heard of these, and I got the feeling she doesn’t know much about them, either.

She’s always been very conservative and reliable before, so we’re concerned. Can you explain something about them?

Krista

Dear Krista,

It sounds a little like she jumped off the cliff and became a roulette dealer. The term “managed futures” is virtually an oxymoron. I think she needs to explain her behavior

and the investment after this stunt!

With managed futures you’re basically betting on the future price of a commodity. What’s the price of gold, or oil, or wheat going to be somewhere down the road? You’re guessing as to what the future will bring, and managing a group of those guesses. What a joke!

People in the brokerage business represent dumb things every day. The sad thing is this is someone you thought you could trust.

—Dave

We, obviously, disagree.

Dear Dave,

We have a few problems with your response to Krista. Initially- there is a big difference between Managed Futures and Managed Futures Funds. To educate yourself further on the issue, check out our newsletter on Rydex and Wisdom Tree’s funds.

Secondly, your description of managed futures is just plain wrong. Managed futures are an asset class which allows exposure to commodities, correct. But they also give exposure to interest rates, foreign currencies, and even stock indices. But more importantly, managed futures funds are run by professional commodity trading advisors who are registered with the CFTC and NFA. So Krista would not be guessing what the future will bring at all, nor would Krista be managing a group of those guesses – she would be hiring a professional manager to monitor global markets and invest in trends both up and down.

The main difference between managed futures and whatever you would recommend to deal with an uncertain economic environment ahead is this ability of managed futures to invest in markets both on the long side (going up) and the short side (going down). This allowed managed futures as an asset class to post gains in 2008 while global stock markets were down a large amount [past performance is not necessarily indicative of future performance].

We understand Managed Futures are not well known among the public (kudos to Krista’s advisor for pointing them out to her), but immediately condemning something which is new and not understood as a “joke” is not the way to educate your readers. A little digging and you would have found that managed futures have the ability to reduce risk in a portfolio, which seems right up your alley.

We launched our blog and weekly newsletter to help people learn more about this misunderstood asset class.  Perhaps you should have checked them out before passing judgment, and perhaps you can reach out to Krista and let her know the joke is actually on those who don’t know about managed futures. If you have any questions regarding managed futures with subsequent reader queries, we’re here to help.

Sincerely,

Your Friends at Attain Capital

 


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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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