{"id":6994,"date":"2013-09-27T15:08:09","date_gmt":"2013-09-27T22:08:09","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=6994"},"modified":"2016-12-21T07:28:23","modified_gmt":"2016-12-21T15:28:23","slug":"hedge-fund-thinking-for-retirement-portfolios","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/hedge-fund-thinking-for-retirement-portfolios\/","title":{"rendered":"Hedge Fund Thinking For Retirement Portfolios"},"content":{"rendered":"

The mystique of hedge funds is formidable. You have to give them your money and ask no questions.\u00a0Fees<\/a>\u00a0are steep.<\/p>\n

Truth be told, however, the actual investments of many hedge funds are quite boring. Like mutual funds before them, hedge fund managers are now caught up in a really tough, competitive game. They have to perform or the redemptions come fast and furious.<\/p>\n

To avoid losing their customers,\u00a0hedge funds<\/a>\u00a0look for stability and performance first. They find it, often, in\u00a0index funds<\/a>.<\/p>\n

\"hedge<\/a><\/p>\n

See, hedge managers know that the bulk of their gains are going to come from just keeping up with indexes and then, they hope, adding a bit of \u201calpha\u201d by taking on a leveraged bet on the side.<\/p>\n

They\u2019re up against a serious challenge. Their fees \u2014 normally 2% of investor assets and 20% of profits, if any \u2014 essentially guarantee a subpar performance over time. The two reasons a hedge fund becomes an “ex” hedge fund is repeated losing years or, in many cases, one real whopper of a loss in a single quarter.<\/p>\n

Because they start from behind, hedge funds are forced to roll the dice to make up the difference and prove their worth. Their managers don\u2019t have any real problem with taking the\u00a0risk<\/a>. It\u2019s not their money, after all.<\/p>\n

And if you buy into one, you are by definition accepting that the risk is higher. It\u2019s why hedge fund investors are \u201caccredited,\u201d that is, they attest to their personal wealth and willingness to lose money in the markets. Accredited is a fancy way of saying you can afford to take a hit.<\/p>\n

Retirement\u00a0investors can\u2019t. No\u00a0retirement\u00a0investor should be rolling the dice with the gunslinger managers of\u00a0Wall Street. The problem with gunslingers is that, eventually, they come face-to-face with a faster gun. Somebody ends up face down in the dust.<\/p>\n

Hedge fund boring<\/h2>\n

The far better approach is to accept what hedge fund managers already know: Indexing is a safe, if boring, way to ensure success over the long run.<\/p>\n

Indexing with a mix of asset classes, combined with\u00a0rebalancing<\/a>, is even better. That way, you get exposure to the more exotic investments in the world without necessarily assuming all of the volatility they bring.<\/p>\n

Taking gains where they occur and keeping costs low is truly powerful investing without the high-risk approach inherent in hedge fund thinking. It\u2019s not just common sense, it\u2019s better investing.<\/p>\n","protected":false},"excerpt":{"rendered":"

The mystique of hedge funds is formidable. You have to give them your money and ask no questions.\u00a0Fees\u00a0are steep. Truth be told, however, the actual investments of many hedge funds … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":6997,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[62,43],"yoast_head":"\nHedge Fund Thinking For Retirement Portfolios | MarketRiders.com<\/title>\n<meta name=\"description\" content=\"The far better approach is to accept what hedge fund managers already know: Indexing is a safe, if boring, way to ensure success over the long run.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.marketriders.com\/investing\/hedge-fund-thinking-for-retirement-portfolios\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Hedge Fund Thinking For Retirement Portfolios | 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