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The US stock market recently hit an all time high.  So far, so good.  But with the threat of higher interest rates on the horizon, smart investors are starting to think about the next phase of the market.  More specifically, how to protect themselves from a down market.    

Sell your stocks or bonds and place your funds in a money market? Maybe, but that certainly is not consistent with a long term investment strategy.   

After all, most of us areinvesting for the long term.  In addition, no one has the ability to predict the exact top or bottom of a market.  You certainly do not want to sell at the wrong time or make an investment decision that is not consistent with your overall investment plan.  So, how can we provide some protection for our portfolio and possibly enhance our gains at the same time?  
  

The answer is found with Managed Futures. Managed futures involve such investments as commodities and currencies, investments only previously available to the institutions - until now.  Why should investors take at  
look at these highly misunderstood investment groups?  For starters, your entire domestic stock or bond portfolio is positively correlated.  The meaning is that higher interest rates and inflation are the enemy of both these asset classes, but are the faithful friend of commodities.  The economic factors that negatively effect your stock holdings will boost your investments in crude oil, soybeans, cotton, cocoa, gold, silver and other commodity items.   

To be sure, there are a variety of economic and political factors that effect investments, but commodities are one of the few investment options that act as a direct hedge against stock investments.  

Aside from diversifying your investments between these two investment groups, is there any investment worth considering that is not correlated to either the stock or  
commodities markets?   Yes, the foreign currency exchange market.  
  

Most investors do not realise that the Forex or foreign exchange market is 25 times larger than Wall Street.  It trades 24 hours a day, is totally liquid and is truly a worldwide market.  Here are some sample returns from a clients managed Forex portfolio:  
  

Jan - Dec 1996      64.92% 
Jan - Dec 1997       89.24% 
Jan - Dec 1998       51.15% 
  

While these returns are impressive, clients are advised that investments into commodities or the Forex markets should be limited to no morethan 5% to 10% of the  
clients overall investments.  The reason for this is risk.  While above average returns can be found in these markets, above average risk also is present.  Investors should remember that these type of investments are meant to be a supplement or hedge to an overall and diversified investment plan.   
 
  

How can investors participate in such programs?  
  

Well, the answer is through a managed trading program especially deisgned for the retail investor.  Here is how such a program works:  
  

Investors establish an account with a firm, such as the Crescent group.  Investors can of course open such an account domestically, but many firms, such as Crescent, do offer offshore accounts that are managed by the very same traders in London and elsewhere that are used to managed their domestic accounts.  The only difference is that the offshore account is domcilied in the name of your foundation or offshore company, and is tax free as a result.  

The funds are then allocated to a group of highly skilled professional traders around the globe who trade your account and the accounts of other clients assigned to them.  In actuallity, each client has their money allocated to four or five different traders or professional management firms.  The management firm then reviews your account daily and the related trading being done by the various trading firms.  If the trader seems to be taking any undue risks or is not trading the account in a style previously outlined, the account is taken away.  Firms like Crescent actually also assign accounts to traders with  
different styles so as to balance the risk and protect the client.  Amoung the four traders, funds are in fact allocated to both very conservative and more agressive managers, so the clients portfolio is always balanced.     
   
   
 

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