The Other Games in Town

I’ve written recently on the declining correlations among individual stocks. This can make stock picking a lucrative venture, if you know how to separate the wheat from the chaff. Of course, you also have to be nimble enough to hit the eject button and pull your chute as the Fed’s market-propping efforts begin to fail.

Once the equity gig is up, whenever that day comes, investors will have to look to other asset classes – commodities, currencies and bonds – for profit opportunities. And we must look on both the long and short side of these markets.

One simple strategy involves gaining exposure to four key asset classes:

1) U.S. Treasury Bonds
2) U.S. Dollar
3) Gold
4) S&P 500

By moving in and out of each asset class – sometimes going long, sometimes selling short – an investor can stay diversified and capture gains that can’t easily be had in the equity markets alone.

Here’s a look at how this approach fared over the past 10 years (in blue), compared to the S&P 500 (in red)… which has gone mostly sideways for a decade.

See larger image

As you can see, investing $100,000 in the S&P 500 10 years ago would have helped you earn about $25,000.

But by following the ebbs and flows of the four major asset classes, you could have done much better. The long/short strategy generated over $250,000 in profits over the same period. And, the diversification gained by investing in multiple asset classes made the ride a lot less bumpy.

That’s how you create a win-win situation in this difficult market environment.

What You Need to Know About the Safe-Asset Slaughter!

You’re not going to believe what’s on the horizon…

The final bubble of the recent financial crisis is about to burst. When it pops – it could be as soon as November 2014 – millions of Americans will be financially devastated… But others will have the opportunity to get much richer.

This controversial video reveals how you can end up on the winning side of the coming carnage…

Click to Learn More
Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.