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Step 1
Know that the handling of managed futures by CTAs is similar to the management of mutual funds. Futures essentially are contracts that require delivery of a commodity, bond, currency or stock index at a specific price and future date. For investors who would rather not trade their own account, this may be a more appealing way to invest in futures markets.
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Step 2
Scrutinize the disclosure document that should be provided to you if you're considering investing with a CTA. The document not only includes information on the CTA, but it also details strategies that will be used to manage the fund. A history of the CTAs rate of return is also provided along with a list of fees.
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Step 3
Consider the minimum amount of money needed to invest with a CTA as well as the fees charged and profits taken for managing the account. It's typical to find that the minimum investment is set at $25,000. As much as 20 percent of the profits made on your account can be retained by the CTA.
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Step 4
Look for a CTA that shows a history of steady profits. Even though past performance doesn't guarantee future results, a CTA that consistently posts profits may prove to be a safer investment.
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Step 5
Research a CTA before making a decision to invest in it. There are several online sources that offer profiles of CTAs and track returns of the top performers. Some sites provide information that covers a few months of data, allowing users to compare the performance of the CTAs listed.
