Futures Are the New Stocks

Futures trading has entered the investing mainstream thanks to a long list of innovative, low-cost online brokers. What has for some time been the province of large institutions is now accessible to the little guy: hard asset exposure. Commodities and indeed foreign exchange are now viewed as legitimate and appropriate asset classes for retail investors seeking a broadly diversified portfolio. While we have witnessed an explosion in exchange-traded products devoted to these assets, investors are able to derive primarily indirect (albeit liquid, with finite downside risk) exposure via these instruments.

Enter the discount futures brokers, with their low commission rates and cutting-edge technology, and, in some cases, the exchanges themselves through their development of retail investor-friendly contracts, such as e-minis. The great hurdle these institutions face is investor education - futures are still mysterious if not utterly terrifying to small investors. For discount futures trading to take hold, further innovation in both investor-friendly products and communications will be necessary.