FOREX INVESTMENTS

Have you heard about Forex, but don’t understand the risks and rewards of investing? If so, click here to learn more about the fastest growing market in the world.

HEDGE FUNDS

Did you ever wonder what makes Hedge Funds so successful? If so, click here to learn the real story about the hedge fund market, as well as the benefits and risks to hedge fund investing.

MANAGED FUTURES

Have you heard that Managed Futures Trading is rare and quite risky? Well, click here to learn the facts about one of the most profitable investment markets in the world.

PRIVATE EQUITY

Are you interested in learning more about Private Equity or Venture Capital investments? If so, click here to get more information on the market that fuels wall street.

PRIVATE PLACEMENT

Are you interested in Private Placement Programs, but don’t know what to believe? If so, click here to start learning fast from someone who has been successful.

Home » HEDGE FUNDS

Hedge Fund Investing, Myths and Facts

hedge-investing-fund-manager-scam-investorEverywhere you look, from the newspaper to television, hedge funds are a hot topic. Though the world’s fascination started years ago, with the recent Madoff scam, there’s been an increase in negative media attention. Unfortunately, this one scandal has skewed the public’s view of the entire market. Ever heard of the saying, “One bad apple can ruin the whole bunch”?

Since the mass media has painted a picture that’s far from true, we felt it was important to outline the facts of hedge fund investing.  In this article, we’ll give you opportunity to learn the truth and dispel the myth about hedge funds.  First things first, let’s take a look at some of the stigmas about the hedge fund market.

Top Hedge Fund Investment Myths

1.  “Madoff Scams” are Common:  The fact is, in today’s world, scams are becoming more frequent in every sector of the investment world. Though there have been two major hedge fund scams over the past few years, there were thousands of other hedge funds that performed ethical business, and had high yields.   We understand that it is hard to ignore something as big as the Maddoff scam, but it is self-restricting to prejudge an entire market based upon the idiocy of one person.

2.  Hedge Funds are Bad for the World:  Though this is the perception that the media has beaten into you, it is anything but true.   If hedge funds are making more money for investors than any other major investment medium, how could they be bad for the world economy?  The fact is, the wealth that is developed in these funds will be spent in economies all over the world, providing a sort of “stimulus” that can’t even be mimicked by the government.

3.  Hedge Funds are Very Risky:  Generally, hedge fund managers use rather low risk strategies, and invest in many of the same things that the typical investor does.  As a hedge fund manager, your focus is to protect your investors from risk first, and attain profit second.   Any investment professional will tell you, stability is what attracts LARGE investors, not monumental yields.  In short, don’t be scared just because you heard a few bad stories, if anything, the hedge fund market should be considered the safest of all alternative investments.

4.  Hedge Funds are All Dying Off:  In the past two years, there have been a number of hedge funds which have gone out of business.  Despite this fact, there is one thing that most people don’t account for, the number of new hedge funds which were created in that time.  In all reality, with the new popularity of offshore hedge funds, there may be more funds that were created than closed. Once again, since some of the major hedge funds have closed recently, it has created a perception in the media that is far from true.

5.  Hedge Fund Investors Must be Rich:   Though most hedge fund managers only offer investment opportunities to those with 1M or more, there are a number of funds which require far less.  Recently, since hedge funds have become so popular, there have been a number of new funds which offer investments as low as 100K.  Even though these funds may require less to start investing, with the collection of a large number of investors, they can all trade as one to earn higher yields than they would alone.

Though it’s important to understand the truth about hedge funds, it’s far more important to remember this: the investment world is full of two types of people, those who know what they are talking about, and those who think they do. Typically, those who THINK they know everything agree with the general public.  On the other hand, those who actually do know the facts have learned through extensive research or first-hand experience.

As with any alternative investment, you’ll never understand the intricacies until you have first-hand experience.  Despite the myths in the media, the fact is, hedge funds outperform the equity markets every single year!  With Trillions invested in hedge funds, this “infamous” market will continue to blossom, no matter what adversity it encounters…

InsideTrade LLC Staff
Phone: (949) 444-2111
Info@InsideTradeLLC.com

6 Comments »

  • DAY TRADER said:

    This is a good article. People need to realize that the crap on the news is really not the story. If anything, if your smart you will trade against the news. Once something makes huge headlines in the finance world, it is usually good to bet against it, or believe the opposite of what they are saying. That makes the difference between real traders, and wannabees

  • Real Estate Rick said:

    Nice blog post, any articles coming on hedge funds that trade forex?

  • Bernard said:

    You are right, I have been swayed by the media a bit tooo much into believing Hedge Funds are criminal and very risky. If they were so risky then rich investors would not be running to them left and right. Probably the quickest way to get rich quickly investing is via Hedge Funds and small caps athttp://www.microcapreports.com/

  • @csheyang said:

    You will find these videos helpful:http://www.opalesque.tv/videos

  • itoldyouso said:

    Your article is the positive spin on hedge funds. Having worked in one, reality is not as rosy. At a macro level, hedge funds operate essentially in a zero -sum game context: some must lose so that someone else wins. Beyond, the only way that the market value goes up in a realisable way is if new cash is invested by investors (note that the value of paper profit is only worth the value of the paper it is written on, until such time that profit converts into real cash). Investment managers manipulate fund perfornance to demonstrate continuous month-on-month growth; it's easy: reduce the management or performance fees temporarily, and catch up on unearned fees when performance is good. Errors are common place particularly with regard to the calculation of fees and some of business terms and conditions are opaque and complicated. Investors support the lifestyle of investment managers in expensive offices, with huge salaries and expense accounts: why?

  • itoldyouso said:

    Investors should be the first to make a profit and everybody else should benefit after that; in the hedge fund industry, it's often the reverse, with the managers, administrators, bankers, intermediaries, brokers, clearers, data and systems providersmaking any money before any profit is passed on to investors. Finally, you can indeed trade with $100k; but, that's because your manager uses $100k as a trading margin with a high leverage of 10 to 20 times. There are safeguards to avoid losing the lot, but ultimately the investor is exposed to the risk of losing $100k and more; the investment manager has little risk other than losing his job.

Leave your response!

Add your comment below, or trackback from your own site. You can also subscribe to these comments via RSS.

Be nice. Keep it clean. Stay on topic. No spam.

You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

This is a Gravatar-enabled weblog. To get your own globally-recognized-avatar, please register at Gravatar.


six + 1 =

);