Hedge
funds are a new craze among the investors who are looking for higher
net returns and to diversify become. Their investment portfolio However, before investing one should first have a basic idea of what hedge funds are all about. A hedge fund is typically a privately organized joint investment fund invested primarily in publicly traded securities. It is a pool of invested assets, mainly used by wealthy individuals and institutions or financial experience. Mostly law to only 50 to 100 investors per fund minimizes the hedge funds. Thus, most hedge funds set extremely high standards for an individual to a qualified buyer.
Typically, an investor with a net worth of over one million dollars and an annual income of over $ 250,000 only considered a qualified customer. Hedge funds are very similar to mutual funds. The difference between the two strategies is to use them. Hedge funds make use of a range of other long than investing in bonds, stocks, mutual funds and money market strategies. Thus, the strategies positive returns regardless of the rise and fall of the stock and bond markets generate.
One way to invest in hedge funds is to invest in a company just before a major merger, such shares go up significantly once the merger takes place. This technique is called 'Risk Arbitrage. But one has a prior knowledge of the merger for buying large quantities of shares in a company, because it is a very risky investment because some mergers may not occur at all. Another technique that can determine while investing in hedge funds, is 'Leverage'. This means that using debt in the capital for investment. 'Selling Short' is also a popular strategy where one invests in apparently undervalued securities, commodities trading and FX contracts, and uses the difference between the current market price and the highest purchase price in events such as mergers.
Although most hedge funds promise higher net profits, they are accompanied by a number of limitations. For example, in the case of many hedge funds, there are certain restrictions on a person's right to his shares to buy. Often there is a lock-in period may extend to more than one year. During this period of his shares can not save. Therefore one needs to reconsider its options and consider a long-term perspective before investing in hedge funds. Moreover, hedge funds also have a higher failure rate than traditional funds. Many of them not by the second or third year of operation. It is estimated that about 5.7% of the existing 8,500 hedge funds closed in 2005. Also, because of their non-regulation, there are no official statistics hedge funds. Besides, hedge funds are more suitable for large companies because they have a price tag.
However, hedge fund is a very useful tool for the diversification of their own investment portfolio. This reduces the overall risk and volatility of the portfolio, as it is not related with the broad market indices. It is a smart choice to take the risk. For those who are willing
Typically, an investor with a net worth of over one million dollars and an annual income of over $ 250,000 only considered a qualified customer. Hedge funds are very similar to mutual funds. The difference between the two strategies is to use them. Hedge funds make use of a range of other long than investing in bonds, stocks, mutual funds and money market strategies. Thus, the strategies positive returns regardless of the rise and fall of the stock and bond markets generate.
One way to invest in hedge funds is to invest in a company just before a major merger, such shares go up significantly once the merger takes place. This technique is called 'Risk Arbitrage. But one has a prior knowledge of the merger for buying large quantities of shares in a company, because it is a very risky investment because some mergers may not occur at all. Another technique that can determine while investing in hedge funds, is 'Leverage'. This means that using debt in the capital for investment. 'Selling Short' is also a popular strategy where one invests in apparently undervalued securities, commodities trading and FX contracts, and uses the difference between the current market price and the highest purchase price in events such as mergers.
Although most hedge funds promise higher net profits, they are accompanied by a number of limitations. For example, in the case of many hedge funds, there are certain restrictions on a person's right to his shares to buy. Often there is a lock-in period may extend to more than one year. During this period of his shares can not save. Therefore one needs to reconsider its options and consider a long-term perspective before investing in hedge funds. Moreover, hedge funds also have a higher failure rate than traditional funds. Many of them not by the second or third year of operation. It is estimated that about 5.7% of the existing 8,500 hedge funds closed in 2005. Also, because of their non-regulation, there are no official statistics hedge funds. Besides, hedge funds are more suitable for large companies because they have a price tag.
However, hedge fund is a very useful tool for the diversification of their own investment portfolio. This reduces the overall risk and volatility of the portfolio, as it is not related with the broad market indices. It is a smart choice to take the risk. For those who are willing
No comments:
Post a Comment