Active Beta is our term for a systematic passive way to enhance returns by capturing risk premia and manage risk in order to outperform your benchmark.
We have all read Triumph Of The Optimists, Pioneering Portfolio Management, and the Chicago school of thought on earning risk premia and the benefits of buy and hold. Well our team at The Macro Trader is here to outperform. We do this by combining the best of academia with the best of real world global macro traders. We diversify using multiple asset classes, strategies, and time frames. We also control risk using strict stop loss and portfolio rules so that we are never risking too much.

With those rules and procedures in place we have two basic types of trades. We have alpha and active beta trades. The alpha are there to produce absolute returns over time independent of our benchmarks. We can be long oil, short rice, long consumer staples, short technology, and long the Yen. All of these have different drivers and the research behind each one is independent of each other. Basically the research for these trades is independent of any benchmark, and are put on solely to generate alpha. Our other type of trade is active beta. These positions are typically longer term in nature and are trying to capture risk premia. We know that over the long term being long equities and fixed income generates inflation beating gains both in theory and in practice.

So why is this so special? Well buy and hold periodically has very large losses. Yes, over the long term the gains are large but in the medium term that can last ten years or more at a time it can be negative. What we have done is incorporate several long term timing models in order to help mitigate risk and improve our long term risk-to-reward ratio. Basically we are in the market when conditions are favorable and out when they are not. Doing this over time allows us to catch most of the upside gains in the market while avoiding most of the losses.

Our model allocates X% for each system that is positive on equities or fixed income. In fixed income for instance we currently have 50% of our portfolio marked towards active beta and have five systems. If one is positive we allocate 10% of the portfolio. If all five are positive we allocate the full 50%. After experimenting with several allocation procedures we have found that simpler in this case is better.

Over time using active beta along side active alpha strategies can help boost overall portfolio gains dramatically. It also helps put more money to work when you might otherwise be coming up dry for good trade ideas. Right now we run this in our fixed income and equities portfolios and in the next few months we will add in commodities and currencies as we have found multiple ways to capture the risk premia built into these markets.

Investing is one of the most important aspects of anyone's financial life. As it is often said in the world of investing, "nobody ever got rich just by collecting his paycheck". And while we can all think of exceptions to that rule of thumb, the fact remains that even huge sums of money quickly seem to vanish out of the hands or bank accounts of people who don't know what to do with money when they have it. Therefore it is vital for any investment strategy that you first build up discipline in your money spending behaviour and set clear goals of how you can place yourself into a position where you can start investing free capital.

The first thing to understand about investing basics is simply this: money is a tool; and, like all tools, it can be used for good or for bad. If money is used in the right way, it will bring great joy and unlock many, many doors for you that would be closed without money. But if money is used in the wrong way, it will not only be wasted, but possibly destructive to you, as you spend your time and energy chasing more money when it's pointless for you to have much money.

Investing your money is one of the most powerful ways of using the tool of money in the right way. When you invest your money, you "pay yourself first", and that is always one of the proper things to do with this tool called money. When investors talk about "paying yourself first", what they mean is this: they always make sure that they set aside some amount of their latest earnings to be invested or, as the case may be, re-invested, so that the money goes back to work for them and multiplies. They pay themselves out of their earnings before they pay their home loan lender, their car loan lender, their local supermarket, the electric company, the gas station attendant, and so on and so forth.

So, the most basic thing of all to understand about investing your money is, very simply, that it's the true key to unlocking the door to real, lasting wealth, and investing is something that you should see as necessary - not a game, not a once in a while thing, but a need and a discipline that you must follow in order to live your dreams.

A languishing dollar coupled with rising interest rates has recently put the focus back on Certificates of Deposit, which were considered outdated and defunct not too long ago. Certificates of Deposit, or CDs as they are called, give the customer an option of a fixed return on money without losing capital due to the volatile nature of the stock market. Since the money is tied down for fixed periods of time, one can also be assured of a fixed amount of return with interest rates typically higher than the current savings rate. While CDs were not a viable option in the bullish years of the stock market, they are now back in focus due to the current slowdown in the US economy. This newfound interest in CDs is almost entirely fueled by the prospect of rising interest rates in the near term future.

When customers invest in a CD, a financial institution provides the investor with a paper certificate, which is a testament of the investment made. Hence the term "certificate of deposit." Furthermore, the bank also keeps the investor updated with periodic statements on the current value of the CD. Certificates of deposit usually have a fixed interest rate that varies based on the maturity period of the CD. As a rule of thumb, higher rates of interest are given to CDs that have a much longer maturity period.

Most CDs provide the investor with the choice between withdrawing the interest on their CDs to a saving bank account or compounding them back into the principal amount. While the former offers the investor a source of liquid cash every six months, it is the latter which is usually preferred due to the excellent returns one gets at the end of the maturity period through compounding interest. After the maturity period, one may withdraw the CD or invest it back again into another Certificate of Deposit. Withdrawing the money generally involves a small penalty such as the withdrawal of the interest accrued for the last six months of the tenure while investing in CDs back again is welcomed by the bank.

One should always take a proper bird's eye of the current market scenario before investing in CDs. A bullish market will render the CD less worthwhile as the principal amount could be invested in other places that provide larger returns. However, investing in CDs during an economic slow-down may turn out to be a wise choice as the investor effectively protects herself from declining market rates and gets a much higher rate of interest than in a regular bank savings account. Besides, the biggest advantage of investing in CDs is that the investor is always assured of a fixed sum of money at the end of the tenure, which is always greater than the principal amount. This has the effect of virtually eliminating the risk factor in investing. With the likes of Warren Buffet predicting a pending recession in the near future, more and more companies and individuals alike are investing their hard earned capital back into CDs.

These countries are often less regulated than the host country and are hence preferred by offshore investors. Offshore investment gives greater freedom to the investor and has the potential for much greater return on investments. Since there is a wide portfolio of investments on offer offshore investment companies play a vital role in conducting these affairs.

Offshore investments can be made in the form of hedge funds, offshore investment funds, overseas mutual funds, offshore investment bonds, offshore unit trusts, offshore property funds etc.

An offshore investment offers a high level of privacy and is sometimes is looked at suspiciously as offering a channel for investing illegally acquired wealth. However offshore investments shield legitimate, affluent individuals from the financial pressures and constraints faced by them in their home country.

In fact offshore investments managed by offshore investment companies are completely legal and are regulated by the jurisdictions of those countries where investments are made.

Investors who live away from their home country, those who want to maintain their financial privacy and those who want to protect their assets legally usually opt for offshore investments.

Other reasons for offshore investments are benefits from a reduction in taxes, opportunity to remain discrete in financial affairs (due to family arrangements), and to expand investments beyond the investor's current jurisdiction, to achieve a better return on investment.

Offshore investment companies with their years of investment experience gained by working in offshore jurisdictions help both corporate and individual investors to protect their assets through market savvy investments, thereby enabling investors to attain maximum return on their overseas investments.

Offshore investments shields investments from capital gain taxation and augments assets through a confidential and secure investment that is not governed by the rules and regulations of the home country.

It is very essential to choose the right offshore investment service provider to ensure that good advice is being obtained and more crucially an excellent ROI is achieved. Offshore investment companies work closely with their clients so as to get a detailed understanding about their investment and financial objectives, which enables them to give the best possible offshore advice.

Offshore investment companies prepare well constructed balanced portfolio of investments for their investors so as to ensure success. They update the investment portfolio because financial markets adjust according to world economies and are prone to internal and currency fluctuations. They make assessments on investments after every six months along with a full financial analysis once every 12 months. This is essential to maintain the growth of the investment portfolio.

Investing offshore can be a very attractive option to an investor who wants to explore and invest in markets outside the home country by acquiring overseas private investments. The common perception that offshore investments can be very risky does not hold any truth. In fact offshore financial centers rely heavily on offshore capital and as such are very concerned about maintaining their reputations.