We often read and hear about wealthy hedge fund managers, but do we know that the hell a hedge fund is or does or what it refers to and why the wealthy use them? A hedge fund is any pool of money invested aggressively. The word hedge comes from the idea that some of the money is invested to limit risk and there isnt a single investor who wants too much risk. Investing in options gives the wealthy ways for their funds to unload shares at a minimum price if a particular investment suddenly loses money. It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market by shorting the market (mutual funds generally cant enter into short positions as one of their primary goals). Nowadays, hedge funds use dozens of different strategies, so it isnt accurate to say that hedge funds just hedge risk. In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market. investopedia/terms/h/hedgefund.asp
Posted on: Mon, 12 Jan 2015 02:18:10 +0000
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