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Showing posts from August, 2022

Sound Advice: August 10, 2022

A Good Year For Hedge Funds After Lagging Badly For A Decade     Investing in a hedge fund may well spark an interesting conversation at a cocktail party, but a closer look at these high-end opportunities tells quite a story.   First, you have to be an accredited investor to join in.   For the typical hedge fund, that means a net worth of at least $1 million, exclusive of your primary residence, as well as an annual income over $200,000 if you’re single, or $300,000 if you’re married. Then there’s the matter of fees.   The typical fee for a hedge fund investment is 2% of assets managed plus 20% of the profits each year.   That’s a high price to pay, but one would hope that the ostensibly super-bright people running these operations could generate returns that justify the cost. The reality is that they have not.   Indeed, average hedge fund returns over the latest 10 years have been less than half those of the Standard & Poor’s 500 Index. For that matter, they have lagged beh

Sound Advice: August 3, 2022

Are tech stocks worth the additional risk?   Companies whose focus is technology have been accounting for an increasing proportion of the total value of the Standard & Poor’s 500 Index over the latest 10 years.   Since the giant tech companies have grown more rapidly and now represent 28% of the total, the S&P Index has become more volatile. The S&P has been largely propelled by a group that had been known as the FAANGs: Facebook, Amazon Apple, Netflix, and Google.   The propulsion goes both ways.   This year, the combination of a lingering pandemic, hyperinflation, and conflict in Ukraine has sent the investment markets tumbling, with this group leading the way down. For this reason, it seems worthwhile to think about investing in the broad market in slightly different ways.   Since the S&P Index is biased toward the largest companies, it would be interesting to consider the results if all stocks in the index were equally weighted.   That would be an exchange-tra