Shield Your Money From the Storm Using This Little-Known Asset Class

Andy Snyder|March 16, 2020

The world is a scary place these days.

There’s a pandemic killing folks. The government is grabbing control of everything it can. And store shelves are going empty.

Folks are panicking.

And it’s not hard to see why.

We’re not so bigheaded or naive to think we can stop the assault, and we don’t think our words will solve any problems.

But they might help you.

We’ve published a lot of good ideas over the last few years that we’re convinced can help you better survive this mess. We’ll publish them throughout the week.

Right now… our focus is on money – and helping you keep what’s yours.

Managing the Future

The stock market lost its luster last week. But if folks followed the advice we published right here in this column, they had some protection from the storm.

That’s because we told them about an odd type of asset called “managed futures.”

Readers who put a few bucks in them endured a lot less pain last week.

In our years in the investment game, countless folks have asked us to detail what we think will be the very best asset class in the next crisis.

To be sure, it’s a tall order. What worked in one crisis rarely works in another. But we can look for patterns to help us put the odds in our favor.

When we studied the five major financial crises between 1994 and 2018, we found a single asset class that repeatedly performed well.

Managed futures – rarely a household term – returned an average of 14.3% annually during the worst of times.

Meanwhile, traditional safe havens like high-rated corporate bonds barely stayed afloat, showing an average gain of less than 1%.

And, as expected, small cap stocks performed the worst, losing an average of 26.1%.

Managed futures are a bit of an odd asset class. The term means many things to many people…

Long the domain of the ultra-wealthy, this investment strategy takes advantage of the long and short side of just about anything that trades on a futures market… commodities, currencies, government bonds, indexes, etc.

The funds don’t buy typical equity stakes. Instead, they bet for or against certain asset classes by purchasing contracts in the realm of the futures market – a world of paper and promises. When the economy and the markets that track it make a wide swing in one direction or the other, this sort of strategy has a tendency to reap big rewards.

It doesn’t, however, pay outsized rewards when volatility is high and there’s no clear trend.

Again, until recently, this type of diversification was limited to the wealthy and well-connected. But in the years since managed futures put on such a grand show during the ’08 financial crisis, dozens of easy-to-buy mutual funds and ETFs have adopted the strategy.

Now investors can get in on the action merely by entering a ticker symbol.

Our Favorites

Here are three of the top-performing managed futures ETFs and mutual funds.

• WisdomTree Managed Futures Strategy Fund (WTMF)
• Natixis ASG Managed Futures Strategy Fund (AMFAX)
• AQR Managed Futures Strategy Fund (AQMIX)

All three have traded higher over the last 30 days… while the S&P 500 crashed into bear market territory.

This is exactly what’s supposed to happen.

Managed futures aren’t a “peacetime” asset class. They’re part of a much larger diversification strategy.

They’re the life ring that keeps a portfolio afloat when crisis strikes.

Most other times, they’re a laggard.

But not now!

The mutual fund and ETF sectors’ entrée into the realm is still fresh. It’s too early to tell whether the average retail investor will get the same sort of wealth-buoying treatment the rich did during the last five crises.

Even so, if you’re looking to protect your portfolio in these most uncertain of times… this strategy has been the leader in four of the last five major downturns.

It’s one you should carefully consider today… before the headlines force the market to make its next plunge lower.

We’ll get more ideas to you throughout the week… including one we’re quite excited about.

P.S. In the meantime, we want to know how you’re doing. Do you have questions about what your next steps should be? Concerns about how to handle your retirement account in this environment? Drop us a line here.