Opportunistic market exposure
Many investors believe in the virtues of portfolio diversification. Yet those who thought they had achieved sufficient diversification through a portfolio of stocks and bonds or with the inclusion of other assets traditionally viewed as diversifiers (such as real estate and commodities), got a rude awakening. When U.S. stocks lost almost half their value twice between 2000 and 2010—during the “Tech Wreck” and the “Credit Crisis,” many traditionally invested portfolios suffered.
A bumpy ride: Growth of $1,000
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. The total return of an investment is only one measure of performance. Performance should never be the sole consideration when making an investment decision. The above is not intended, and should not be construed as, asset allocation advice. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Indices: US Stocks: S&P 500 TR Index; US Bonds: US Aggregate Bond Index; Commodities: S&P GSCI Total Return Index; Int'l Stocks: Morgan Stanley Capital International, Inc. EAFE Net Index; REITs: FTSE NAREIT Composite Total Return Index. Traditional Portfolio = 60% US Stocks and 40% US Bonds; Traditional + Other Assets = 42% US Stocks, 28% US Bonds, 10% Commodities, 10% Int'l Stocks, 10% REITs. Bull markets: 01/97-08/00, 10/02-09/07, 03/09-present; tech wreck: 09/00-09/02; credit crisis: 10/07-02/09. Source: Altegris.
Adding alternatives to the mix
At Altegris, we believe a portfolio that goes beyond traditional stocks and bonds and includes alternative investments may potentially add to overall portfolio efficiency.
The chart below illustrates through indices, what would have happened if alternatives were added to a traditional portfolio of stocks and bonds from the chart above (a traditional portfolio plus 30% allocation to a basket of alternatives, which includes an equal distribution to managed futures, global macro and long/short equity).
Historical portfolio comparisons
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. The total return of an investment is only one measure of performance. Performance should never be the sole consideration when making an investment decision. The above is not intended, and should not be construed as asset allocation advice. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Indices: US Stocks: S&P 500 TR Index; US Bonds: US Aggregate Bond Index; Commodities: S&P GSCI Total Return Index; Int'l Stocks: Morgan Stanley Capital International, Inc. EAFE Net Index; REITs: FTSE NAREIT Composite Total Return Index; Managed Futures: Altegris 40 Index® (started July 2000; data available back to 1990); Global Macro: Barclay Global Macro Index; Long/Short Equity: HRFI Equity Hedge (Total) Index. Traditional Portfolio = 60% US Stocks and 40% US Bonds; Traditional + Other Assets = 42% US Stocks, 28% US Bonds, 10% Commodities, 10% Int'l Stocks, 10% REITs; Traditional + Alternatives = 42% US Stocks, 28% US Bonds, 10% Managed Futures, 10% Global Macro, 10% Long/Short Equity. Bull markets: 01/97-08/00, 10/02-09/07, 03/09-present; tech wreck: 09/00-09/02; credit crisis: 10/07-02/09. Source: Altegris.