Hedge funds are private funds, usually only available only to high-net-worth investors (usually via a Family Office. The managers have complete flexibility to bet on both directions of the market (up or down). They charge hefty fees (typically a minimum of 2%) and share in the profits (typically 20% of profits go to the manager).
A few of these private partnerships have performed brilliantly over many years, but it’s a minuscule minority—and the very best of them tend to be closed to new investors. The problem is, hedge funds start with a huge disadvantage in every major category: fees, risk management, transparency, and liquidity.
From 2009 to 2015, the average hedge fund lagged the S&P 500 for 6 years in a row.
- A Customized Approach to Asset Allocation
- Use Index Funds for the Core of Your Portfolio because they give you broad diversification in the most low-cost, tax-efficient way. They beat almost all Hedge Funds and Mutual Funds over the long run. For maximum diversification, we want exposure to stocks of all sizes: large-cap, midcap, small-cap, and microcap. By diversifying so broadly, you protect yourself against the risk that one part of the market might get crushed. By indexing, you enjoy the long-term upward trajectory of the market without letting fees & taxes corrode your returns.