Can YOU Get in the Global Macro Game?

Some say value investing is dead. The concept of finding cheap companies with sensible business models does not seem to work in these volatile markets anymore, and investors everywhere have to modify their strategies to maintain and grow their portfolios.

Globalization and geopolitical dynamics are now obvious drivers of international economics. What can you do to keep up with the frenzy of news? Perhaps understanding the "global macro" strategy can help deliver much-needed returns to your portfolio.

Put simply, global macro is an investment strategy that primarily relies on global macroeconomic fluctuations to make investments. Factors such as interest rate behavior, political mandates, and broad macroeconomic policy all influence global macro investments.

Currently, investors are monitoring the Eurozone and emerging economies. While the US has problems of its own, the current global investment arena is affixed on the European sovereign debt situation and growth patterns in countries like China, India, and Brazil.

Although many hedge funds are starting to adapt to the global macro style, several asset managers have built their entire careers off the strategy. The most famous manager is arguably George Soros, who famously disrupted the Bank of England in 1992 after shorting the Pound Sterling. Other hedge fund managers include Alan Howard of Brevan Howard Asset Management and Mike Novogratz of Fortress Investment Group.

Once professional investors determine a profitable macroeconomic trend, they try to figure out trading ideas that minimizes risk exposure. For example, if a country's monetary policy changes, traders may long an index ETF while shorting the country's currency.

As expected, global macro strategies often involve alternative assets such as currencies, commodities, and credit-based products like credit default swaps. Retail investors do not have to fear, however, as there are trading mechanisms available that do not require complicated securities.

In this day and age, exchange-traded funds (ETFs) exist for almost everything. Whether an investors want an ETF that tracks emerging markets or an ETF tied to a particular currency, they are sure to find one traded on the American stock exchanges.

One thing to note, however, is that employing ETFs rather than their underlying assets is like a double-edged sword. Investors are able to avoid the complexity and risks associated with the underlying securities, but they also leave profits on the table.

For portfolio management purposes, investors can consider ETFs that track currencies like the US Dollar, the Euro, and the British Pound. There are also ETFs that track international debt, which is a crucial aspect of any global macro strategy. One ETF that may be of interest is the SPDR Barclays International Treasury Bond ETF BWX. ETFs tracking commodities like crude oil and gold are also extremely common.

Investors do not have to lose track of modern, international financial markets. As every country in the world becomes more interdependent on each other, financial markets and strategies become increasingly complex to understand. With the help of ETFs and global macro strategies, retail investors may be able to compensate their portfolios' characteristics with a modern, unique mechanism.