Top Hedge Funds

Before you are able to choose top hedge funds you need to have a fundamental understanding of this investment type. This type of fund was first established to sell short and buy long. This concept eliminated large losses that were caused by fluctuations in the market. The way to make money with hedge funds is to select the right stocks and buy or sell at the right time. Hedge funds can only be invested in by those who have an annual income of $200,000 or more, a net worth of more than $1 million or a minimum of $5 million worth of investments.

One reason for these requirements is because hedge funds are not registered investment companies and putting such requirements on them keeps regulations low. The majority of modern funds of this type are managed offshore in places like the Cayman Islands. Because of these offshore locations and the secret nature of hedge fund investing it can be hard to speculate or make predictions on top hedge funds.

There are various strategies used by hedge fund investors. For example, there is the trading of options, the buying and selling of undervalued securities, and partnerships rather than corporations as the status of the funds. Some investors will purchase shares of a company that is involved in a merger, which means if the merger is successful the investor will profit and the only way a loss would happen is if the acquisition fell through. This is sometimes done at the same time as selling shares of the company that is in the position of acquiring. Risk arbitrage is the term used to describe this particular investment tactic.

Top hedge funds can be researched online and in investment publications. These funds are meant to be balanced so that regardless of market fluctuations the investor can still profit. Because of this, and because of the dollar amount required for hedge fund investing, returns can be huge. Before investing in one of these funds, plenty of research should be done. You must figure out the style of trading being used, how much risk is involved, and try to keep costs down. There are all kinds of different ways hedge funds operate, some are involved in the traditional stock market while others may be into Forex or commodities.

In addition to understanding the strategies, an investor should be comfortable with the risk involved. There may be a high amount of risk taken on for the possibility of a big return. Regardless of the risk or the type of strategy, hedge funds are an expensive investment. Also, if you utilize the services of an investment manager which you will probably need to do when investing in a hedge fund, this will incur additional costs.

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