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Why Futures and Options
 Over the last 45 years, commodity futures have outperformed both stocks and bonds with less risk and volatility
- Yale/Wharton Study Learn More >
*Past Results are not necessarily indicative of future results.
One of the key components of a well balanced portfolio is diversification. Diversification is increased when a portfolio consists of assets that are either negatively correlated with each other, or have zero correlation altogether. While a portfolio of equities (stocks), debt (bonds) and fixed income (cash, CDs, etc) does offer some diversification, this can leave an incomplete picture. As such, investors seeking performance in equity bull markets, bear markets, and sideways markets should consider exploring alternative asset classes.
With the growth of the financial and commodities sectors, the global Futures and Options markets have daily volumes that exceed the stock and bond markets of the United States. While inflation has a negative effect on stocks and bonds, commodities tend to do well in an inflationary environment. In addition, placing a certain percentage of your portfolio in alternative asset classes including commodities can actually further diversify a portfolio. This can reduce the risk of your overall portfolio.
More importantly, a Yale Center of Finance study found that over the last 45 years, commodity futures have outperformed stocks and bonds on a risk-adjusted basis.
As such, institutional investors, including traditionally conservative pension funds, are shifting their allocations to include a portion of their investments in Futures and Options.
Whether one directs their own trades or employs a trading advisor to make decisions on their behalf, most people are familiar with the heavy burden of short-term capital gains taxes. The taxable profits of commodities futures trading are deemed as section 1256 contracts, taxed at 60 per cent of the long-term capital gains tax rate and 40 per cent of your short-term capital gains tax rate. At Tiger Financial, we work with investors who realize the potential for a more diversified portfolio when they transition from an equities-only trading strategy, which offers limited tax advantages, to a strategy that includes commodity and financial futures.*
*Please consult your tax advisor or investment professional when making a decision to invest in the Futures and Options markets.
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