It is unsurprising when the media and countless people paint hedge funds in a negative light, because they are thought to be incredibly risky, unregulated, and operate in a volatile market. But once people see past misconceptions about hedge funds, they would see the potential of this investment vehicle to optimize and balance one’s portfolio.
Some of the myths surrounding hedge funds are the following:
All hedge funds are risky
First of all, it is important to be aware that every investment vehicle inherently carries a unique set of risks. Secondly, there are various ways to define risks. And if riskiness is expressed in terms of standard deviation of performance, then stocks and private equity have actually been riskier than hedge funds the past two decades.
Having said that, there are more than 10 types of hedge funds, and not all of them have the same level of risk. Depending on their correlation to the overall market movement, some hedge funds have low-risk expectancy, while some have high-risk expectancy.
Hedge funds are only accessible to institutional investors or high-net-worth individuals
There are actually many ways to enter hedge fund investments, and one does not even have to shell out hundreds of thousands of dollars to do so. Some hedge funds are traded on exchanges, while some can be accessed through pooling of investor money together. There are even fintech startups that use hedge fund strategies to invest.
Learn more about hedge funds by following this Scott Tominaga Twitter page.
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Image source: hedgethink.com
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Some of the myths surrounding hedge funds are the following:
All hedge funds are risky
First of all, it is important to be aware that every investment vehicle inherently carries a unique set of risks. Secondly, there are various ways to define risks. And if riskiness is expressed in terms of standard deviation of performance, then stocks and private equity have actually been riskier than hedge funds the past two decades.
Having said that, there are more than 10 types of hedge funds, and not all of them have the same level of risk. Depending on their correlation to the overall market movement, some hedge funds have low-risk expectancy, while some have high-risk expectancy.
 |
Image source: smallcapnation.com
|
Hedge funds are only accessible to institutional investors or high-net-worth individuals
There are actually many ways to enter hedge fund investments, and one does not even have to shell out hundreds of thousands of dollars to do so. Some hedge funds are traded on exchanges, while some can be accessed through pooling of investor money together. There are even fintech startups that use hedge fund strategies to invest.
Learn more about hedge funds by following this Scott Tominaga Twitter page.
