Investing in Hedge Funds Isn’t For Amateurs. Here is What You Need to Know
Hedge funds can be a great means for investors to see significant gains in their assets if they perform well. However, one major key to seeing that kind of success is not going into the experience blind.
Lacking research can also lead to investing in hedge funds being a costly learning process. That is why the site CARL shared some of the basics that beginners should keep in mind.
To start off, you need to know that only accredited investors are even offered the opportunity to invest in hedge funds. In short, what that means is you either need to have an annual salary exceeding $200,000, or you need to have a net worth exceeding $1 million.
Due to the high-money nature of hedge fund investments, those protections are in place to ensure only those with solid financial knowledge have access to them. This limits the risk of people wiping out their savings on a high-stakes investment they didn’t understand.
To give you an idea of the kind of commitment hedge funds requires, they often have minimum investments starting at $100,000. Some have minimums in the millions. And it isn’t just the money that makes hedge funds exclusionary.
Hedge funds are not open to the general public. Even researching them can be difficult due to how tight-lipped many are regarding their information. This can make it extremely challenging to invest in one even if the money is not a problem for you. In fact, some of the major hedge funds have not accepted any new investors in over 30 years. You need to be prepared for more hurdles than just your willingness to invest.
Fred Hubler, CEO and Chief Wealth Strategist for Creative Capital Wealth Management Group, who built his company on alternative investments and retainer-based planning, believes, ”hedge funds are the buzzword of the day, and we use them, but there are other ways to get similar non-correlated exposure, and we like to use every available option for our clients, so we don’t just stop at hedge funds.”
Hubler and his team at Creative Capital spend a lot of time educating clients as to the legitimacy of these investments. “The hardest part,” according to Hubler, “is explaining the investments to sophisticated investors who have never been exposed to accredited investments.”
As for whether hedge funds are worth all the fuss, they certainly can be, depending on your priorities. If you have concerns about your assets losing value through inflation, hedge fund investments are a good shield against that. Depending on the fund that interests you, you could also choose one aiming to be ambitious in its gains, though that is usually riskier.
Regardless of which hedge fund appeals to you, it is always important to bear in mind that there is no guarantee your investment will succeed. You need to be prepared that even if you jump through all the rights hoops, things might not work out. No investment is something to pin all your hopes on.
To further expand your knowledge when it comes to investing in hedge funds, get more guidance in the post from CARL.
Want to know if you’re on the right path financially? CCWMG’S Second Opinion Service (SOS) is a no-obligation review with one of Creative Capital Wealth Management Group‘s Wealth Strategists.
It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.
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