|  MAR 1984

Analyzing Risk/Reward Tradeoffs by Fred S. Gehm

Analyzing Risk/Reward Tradeoffs by Fred S. Gehm These days, more and more potential traders are avoiding the day-to-day problems of commodity trading by committing their funds to professional money managers. For many, perhaps most, this is a reasonable decision, although unfortunately it does not solve all of their trading problems. Deciding to use a money manager only replaces the many difficult and important problems of trading with a few very difficult and very important problems. The most obvious and most important problem is that of selecting a money manager in the first place. With several thousand individuals offering managed accounts of one kind or another, how can the ""best"" money manager be selected? Selecting a Money Manager It's been my experience that most individuals ask the wrong questions when attempting this selection. They look for a manager with the highest potential returns, that is, the one who might possibly make the most money. A somewhat more reasonable approach is to select a money manager who is likely to make the highest return, a subtle but all-important difference.

by Fred S. Gehm