Wednesday, October 25, 2006
Hedge Funds
Hedge Funds are the typical mutual fund on ecstasy. These funds were high flyers especially in the tech boom when they were able to get in and out of all the tech titans before the big crash in 2001 but investors are still expecting a lot from their hedge fund investments.
A new poll by Morningstar Inc. says that 65% of financial advisors who where polled about hedge funds said they expect double digital gains each year. It also states 67% of the respondents claim more than 10% of their clients invest in alternative investments; hedge funds.
Hedge funds have a different set of rules and regulations that allow them to trade more often. This usually leads to higher fees to the investor because of such rapid exits.
We’ve come to expect so much from investments like hedge funds because of their lucrative past. But now the market is becoming saturated and the funds have TOO MUCH in capital to keep up the gains. About 9000 hedge funds invest a total of $1.3 TRILLION dollars, that’s twice as much as in 2001!
If you’re in it for the long haul stick with traditional investments. Mutual funds are just as good as hedge funds without the risk and lower fees.