Can someone explain "hedge funds" (for Dummies) please.? - hedge funds for dummies
My style is visual learning (Artist), or you can use metaphors that might make sense to me. It is also an effective way to invest in these days? Thank you for making the effort.
Friday, January 15, 2010
Hedge Funds For Dummies Can Someone Explain "hedge Funds" (for Dummies) Please.?
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Imagine an art gallery, open the $ 25,000. You can get a loan - or you can ask 24 of his friends and acquaintances, to $ 1000 a (are you giving the 25.), and each is at 4% (1 / 25) of the profits. If the company together, we are $ 1000 each - all for $ 25,000 of the total amount.
Similarly, a fund (hedge funds, mutual or pension may be) where you can set to 25 and in money, instead of opening an art gallery, invest, and we share the profits. The same idea - to share risk, share the profits. You can also obtain benefit from the great. It is less expensive on a per share for 10,000 shares of 100 shares. There are also systems (such as corporate bonds), which often requires a minimum of $ 10,000 to purchase. She lost 10 in a huge advantage when you do it alone - have but if 10 of us, is $ 1000 per. This means that we must invest in more places.
The difference between a hedge fund, mutual funds and pension funds is in fact one can invest in this sector, and that the FundInvestors their money in.
Pension funds are defined conservatively - only high quality investments, usually strictly as a special bond rating or higher. That makes sense - the bond yields are used to pay pensioners, the money must be there.
Investment funds have more leeway. Investors should know what is important to note, so here there are more risk. A fund is fully invested in equities to bonds, funeral for rural development in South America, or export company in Russia. You can also diversify - that is, you can invest in many different companies in many different industries. If you buy stocks from 10 different companies on their own, as 10 different operations (and a little money, because you probably could buy a block of 100 shares to each). Or you can deposit money into a fund (usually at least $ 2,000) and the benefits of all the shares of 10 companies.
Now to the meat: hedge funds. Consider this as a high risk investment funds ONLand the rich. Normally you have to invest a net worth of $ 1 million and a net income of $ 250K per year - and you have to put in $ 100K in advance.
The original meaning of hedge funds is the so-called "reporting" is a technical resources to the risks that are compensated by the use of derivatives markets. A derivative is essentially an agreement between two investors, to raise money for a dependent, or borrow from another underlying asset (stocks, commodities is carried out). With the help of complex mathematical equations (Financial Engineering), can be found virtually guaranteed once again .... but it takes a lot of money to get the penalty. If one of the assumptions of these models are not correct, the fund has lost money and time.
Today is hedge-fund may invest in any of his letters to say they can not just limited to equities and bonds (mutual funds) are. Hedge funds typically the money by buying companies that store directly (or through venture capital companies), bypassing intermediaries in financial markets and the direct use ofAdvantages. Hedge funds have also been known to invest in the film - extremely high risk - and other companies.
You may not be able to invest in hedge funds at this time - if you can, the fees are incredibly high. Each fund has a manager who is paid by the Fund's income or income (or both). The managers of pension funds, are also employees of companies with a fixed salary. Managers of mutual funds are also employees of the donor, and their income, how much money to the fund. The hedge fund managers are based on what you pay for - a lucrative, high interest rates paid.
If I were you, I would look at mutual funds - especially index funds that track the market and tend to be very small in terms of prices. You can also buy blocks of power of the dividend (since dividends are taxed at a preferential interest income) will be, because the market is cheap. But hedge funds are not for the light-hearted, how - or even the upper class.
A hedge fund is an opportunity to invest some of their money in order to protect the bulk of their money (as if the acquisition of Paris).
As an artist, so ... Presentation of a new benchmark wholesale by a famous architect. You see in the building and I think it's sooo trivial if uninspired. You can be boring, yes, I hate almost everything about the building, but they contain no detail, little controversial architecture so surprised and impressed that overcomes all the deficiencies in the rest of the project.
In the meantime, the mainstream, the person can love a little more demanding than the rest of the building, and hatred of the little details, but the detail is so small that you might not even notice.
The hedge fund is only recently, the controversial details of the risk of their investments.
You invest a little money to high risk / opportunity, high reward comes in the opposite direction from their other investments. What if oil prices rise, oil companies make money, but companies that sell gas truck to lose money on alcohol.
So if you alot their money invested in oil, to invest some hedge freight forwarders. So down in the case of oil would be the stocks of trucks and be protected. Besides, who must be properly protected, you can on the truck business, instead of buying shares in a forwarding options. Option prices move much, so that the measures move very little. It is very risky, because options can quickly be worthless, but when an option goes up, up, like 10 or 100 times more than a series. The idea is the only way you can lose all your money in the options is that if you have more money in oil stocks.
This is just an example, focusing on hedge funds in foreign exchange and derivatives and other sophisticated high-risk investments, which are known to invest to move in the opposite direction to other investments. A good example is gold when the dollar loses value, gold's value. If you have a large amount of investment dollars, you buy a small high risk, high reward investment in gold as a hedge.
Because of his great laugh --sk nature and purpose are, hedge funds only by people become very rich, and usually large minimum investments, usually in millions.
Hedge funds are controversial because they make large investments that are in the opposite direction of most investors. They are to invest often that a company bet wrong (works as "short selling"), and while most people in the company they think they can do to invest something.
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