Hedge Funds

You read and hear a lot about hedge funds. Unfortunately, most of what you hear is negative because it comes from the major media that has an interest in reporting negatives about them because the major media is supported by so-called standard mutual funds and brokerage companies that spend big bucks for advertising. Hedge funds are NOT allowed to advertise.

First of all a hedge fund is almost identical to a mutual fund. There have actually been fewer fraud complaints about hedge funds than about mutual funds. That doesn't mean they don't lose money just as regular mutual funds do.

The underperformance of mutual funds is not highlighted in the press; you don't bite the hand that feeds you. I'm talking about advertising revenues. Would Janus, Invesco, Vanguard or any big fund family continue to place advertising dollars with someone who told stories about their losing funds or recommended that investors sell them to find a better performer? Hardly.

Mutual funds use customers' money to buy stock and bonds. Hedge funds are not limited to what they can buy. The can buy or short sell derivatives, commodities, options, oil and gas leases, freight rates and even take an investor's money to the race track (although I doubt if they would). The managers of these funds are specialists in their field of knowledge and many do extremely well. Just because they are different doesn't make them bad. Like all investments you must know where your money is going and how it is going to be invested.

The one major difference is how the fund manager is paid. Regular mutual fund managers are paid on how much money they manage and NOT on performance. Hedge fund managers usually receive 1% of the fund assets that goes for expenses and 20% of the profits they make for their investors. In other words if they don't make a profit for you they don't get paid. I sure would like to see them do that in regular mutual funds, but the Securities and Exchange Commission is the captive of the mutual fund industry so don't hold your breath. The true ability of fund managers would be exposed and many funds would disappear as the smart investors would be transferring their money to fund managers who have winning records every year. Yes, every year. No more of the nonsense of how they beat the S&P500 by 5% yet lost your money.

So many of the hedge fund articles say the investors are being hood winked into putting money into these funds. I don't think so. Almost every big state and corporate pension plan, university endowment, charitable trust and other large financial plans have money in hedge funds. Like any cautious investor they did their due diligence to find out the track record and management capabilities of the hedge fund.

You have to be rich to put money into a hedge fund. They require an income of $200,000 per year and assets of one million or more. Many require large initial investments.

If you qualify they are definitely a better place than a regular mutual fund, but you must do your due diligence.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

Are You A Stockaholic?

Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More

Discipline

One of the great "secrets" of successful people is discipline... Read More

Trading vs Investing

I often hear from people, "I don't trade. I invest.... Read More

No Load Mutual Funds: Boost Your Portfolios Returns

Investors who exclusively use broadly diversified, no load mutual funds... Read More

Social Insecurity

Just about everything you have been told about Social Security... Read More

Whos Calling?

Its dinnertime and the phone rings. It's Joe Noname with... Read More

What is a Trading Plan ? and Why You Need One?

How do you make money without picking tops and bottoms?I... Read More

The Stock Market - Part 1: Believe It Or Not, Its Always Been Your Best Friend And Always Will Be

Regardless of the fact that the world's stock markets have... Read More

Stock Trading Secrets?

How often have you come across an advertisement or e-mail... Read More

?Fears Only Enemy Is Action?

What a great statement!I just heard someone use it in... Read More

Mutual Fund Honor Roll ? Buy High, Sell Low by Chasing Performance

Buy high and sell low -- It's not a typo.Millions... Read More

Boiler Room 7/17/00

On Friday or Saturday evening my wife gets a movie... Read More

No Load Mutual Funds: Investment Hype vs. Investment Help

With the internet such a huge part of our daily... Read More

Bull or Bear?

Cat or dog? Maybe Zebra. Shucks, I don't know, but... Read More

Why Change Funds?

On November 17 I bought 7 different mutual funds and... Read More

The Cub; II

We keep hearing about this bear market and that the... Read More

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

A Triple Dipper: How to Make 3 Profits on 1 Stock Trade

This is a rather simple strategy with which I am... Read More

Getting Even

I know there are a lot of you out there... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Buy and Hold Investment Strategy

"Buy and hold" is one of the most heralded investment... Read More

Prosperity

It has fallen upon the consumer to make our economy... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend... Read More

Some Good News for A Change

Before we get into all the good news out there,... Read More

Trading Education: The Best of Both Worlds!

I made my very first investment in the stock market... Read More

Can?t Stand The Heat

It seems that every day I turn on the TV... Read More

Different Types of Mutual Funds

This is a guide to the different types of mutual... Read More

My Stock - Right or Wrong

We all know the expression, "My country, right or wrong",... Read More

The Secret to More Winning Trades is as Simple as Avoiding This Common Mistake

If you're a normal human being, your need to feel... Read More

Direction

It is difficult to make money in a bull market,... Read More

Peer Groups

Whenever I see mutual fund comparisons in the trade publications... Read More

Humpty Dumpty the Stock Market Falls Down

Humpty Dumpty had a great fall and all the King's... Read More

Prospering with Mutual Funds: How Anyone can ?Afford? an Investment Advisor

Recently I was invited to appear on a live CNNfn... Read More