I dont understand…why do you even want to do global macro? Are you good at it or is it more of a “this looks interesting” thing?
You are from Finland?
Buy 20k of NOK and call it a day…
Alright, let me try to hopefully clarify the situation without going in too deep… Im also getting confused: Background: My degree program did not focus strongly on Finance, but rather international business. I graduated this year and had made a hopefully not too detrimental decision. While most my classmates started studying GMAT to continue Masters, I began rather to study for the CFA level one. I felt that knowledge was more important. I also felt that i lacked working experience (How could I be a master of something I didnt have the basics to or experience with?)… Long story short, my friends did the GMAT and got into masters while I passed CFA level one. Problem is now. I have one year ahead of me. Although im definetly smarter than I was prior to the CFA, my idea was that i would have an internship or work by now. I dont. I’ve tried and still am sending CVs, networking, and even randomly knocking on doors. Times are tough and my limited Finnish language capabilities really dont help me. Thus, im trying my best to spend my time wisely. This includes looking for work and when im not in work, increasing my chances. One of my ideas is through independent portfolio management. My idea stems from tech stories out there: poor guy learns computer software skills, works day and night building softwares, offers his services for very cheap, gains knowledge and recognition, shows knowledge in resume, gets hired. My main goal is to be able to independently gain at least some of the experience needed for my “hopefully” future job or until I land something. I have had about two to three situations where I came very close to having an amazing, full time work opportunity, only to be brought down by my inexperience and lack of market knowledge. I could go on forever but thats my situation. For the future, I am looking for work and will begin studying for the GMAT which i will take in Decemeber (hopefully enough time for 700+). Janurary, I will start studying for CFA Level 2 and by september, ill should be in Masters in finance at a top school. This, however, could change tomorrow if i get a job offer. Thus, im not a global analyst or money-hungry buffoon. Just trying to increase my odds.
ANYWAYS, back to business: Matter at hand is that I would love to build a portfolio from stratch, but i also understand that its not my money! Although it seems innocent (here take some money), if he likes the porftolio and set up… he told me that he will give me more and cherry pick some more to the portfolio! I really dont want to screw it up! Dont want to expose the portfolio to too much risk at the beginning which is why i like the idea or indexing and ETFs… after a while, when opportunities or stocks me and him find worthy come up… we can add it to the porftolio until we have about 10 - 15… then i can really take action and become a real PM! I think forex would really work in our case. Its short-term based and possibility to take well worth risk! thats the feeling im getting from him… It also a good place for me to learn the impact of market news and economic indicators… Just made about 200 EUR/USD pips with my virtual 1 million on the news about Quantative easing 3!
It sounds like you are more of a trader mindset than an investor. Nothing wrong with that, just recognize it. Traders tend to look for short and maybe medium term changes in price. They tend to be trend following to some extent, although there is countertrend trading which depends on short term mean reversions (elliott wave theories, and things like that). In contrast, investors tend to have longer holding periods, need to be comfortable with lower turnover, and do the fundamental analysis that makes them feel comfortable holding on if a position starts to move against them for a little bit. Traders on the other hand tend to jump out if the trade moves against them. Both points of view have justifications, but it depends somewhat on the time frames involved.
Global macro - as I’ve learned - is actually more trade like and less investment-like. That was a surprise to me. Global macro is about trying to figure out fundamnetal processes, and then trying to figure out how long it is going to take for the rest of the investing public to come to your macro viewpoint too. Being too early can be not much different from being wrong. This seems to be why a lot of global macro tends to be trend-following, and to some extent why the tactical asset allocation I do tends to be momentum-based. We have a few key ideas, but then we have to wait for momentum to pick up before actually putting on positions in size. You also have to go for a long time betwen ideas, because - quite frankly - the major macro plays only come a few times per year at best. In hindsight, there are more, but the ones one can actually have a decent chance of getting right come perhaps once a quarter, if that. Being able to sit tight and deploy (or choose not to deploy) your money is one of the reall difficult decisions in macro.
Then there is thematic investing, which is not exactly the same as macro investing, but there is some overlap in terms of the thought process. With thematic investing you may have a diversified portfolio and then you will start to overweight things in the portfolio that fit the theme, so if you wanted to do a cloud theme, you’d overweight the cloud companies relative to their weights in a market portfolio or other benchmark. One way to do this is to build your own mini cloud portfolio that has all of the cloudy companies in it, and then have a weighted average of your benchmark and the cloud portfolio (which could potentially include shorting companies that are going to lose from the cloud). With ETFs, you could do something like put 10% or 20% of your money in the cloudy portfolio and then 80% in the market portfolio or whatever asset allocation you choose.
If you are just beginning, I would stay away from currencies… currency plays are necessarily highly levered, and you’ll need to be very very good at your risk management not to get blown out of the water. Even ETFs for currencies I suspect are designed to squeeze money out of investors who can’t trade futures and forward contracts on currencies. Once you’ve done some equity trades, maybe wade into currencies.
FX is a difficult market. Too many heavy hands involved for my taste.
But good currency managers are always in demand. If that’s what interests you I say go for it. Accessing the market efficiently with $20k is going to be a challenge though.
I agree, but it’s also very hard to do active management in some countries:
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Markets lack info when compared to US/Europe
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Market manipulation seems to happen more often
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Transaction costs tend to be higher
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Locals investors usually know what you don’t. They know more about their accounting systems, legal and cultural factors that may drive competition in some sectors, consumer behavior, well, a bunch of stuff. You’ll almost certainly be at an informational disadvantage, at least at first - maybe forever.
Of course, if you mean opportunities are the stock market in general or GDP growth (which makes sense since you’re a macro guy), you can do larger, more diversified bets. But even large bets on individual countries are very risky (mostly political risk, not past standard deviation, even though they may be highly correlated).
It’s also probably hard to invest in some foreign markets directly from Finland, unless you have a pretty big portfolio.
Even though there’s a bunch of issues, if you have the willingness and ability to take that risk (and that probably means a big portfolio to justify the transaction and legal costs) you can probably bank on a long run expected return improvement by betting on some higher risk countries (I’m still assuming the less developed world is riskier, which is now a little more case by case I guess)
Demographics will probably help some developing markets as well. That’s a big driver and a little more predictable than others.
Many countries don’t even have to innovate - just apply technological advancements developed somewhere else and see their productivity go through the roof. Of course government can have many ways to screw things up - and they will - so be ready for anything and be sure you can stand the volatility - I wouldn’t throw the bulk of my portfolio into such a strategy.