Start Trading Binaries with the FREE Binary Options Robot - CLICK HERE

Why Hedge Funds are Losing Out

Hedge funds have long been seen as an investment strategy reserved for the rich, something with a strong likelihood of making these elite investors even richer. In reality, all that a hedge fund actually is a loosely regulated investment fund, one that is legally allowed to trade different types of securities and use non-traditional trading methods, all for the purpose of creating a profit when other markets are struggling.

In that light, it doesn’t make much sense that many hedge funds are struggling in today’s economy. With Wall Street hitting record highs on a routine basis right now, why would an investment tool that is designed to outperform the stock market be losing money when stock indices keep going higher and higher?

First, realize that not all hedge funds are created equal. The same strict requirements are in place across the board, but that doesn’t mean that all funds are managed in the same way. Some fund managers are highly skilled professionals and are able to generate a ton of profit for their clients. Others are not as skilled and may not have the same expertise. It is not quite as difficult to become a registered hedge fund manager as it is something like a stockbroker since the regulations are a bit looser for hedge funds. Also, because of various alternative methods of trading, such as within the Forex market, a hedge fund manager has more opportunities to take undue risks with their clients’ money, and this means a greater likelihood of losses over time.

In the end, a hedge fund can be a great deal, but they are also reserved only for the richest of investors, and even then, the selection process is not always the greatest. It is much easier to find a bad hedge fund than something like a bad mutual fund. In other words, it’s not really that surprising that hedge funds are struggling right now.

There’s another issue going on in today’s markets, too. A lot of the success of hedge funds is linked to volatility. And today’s markets are not volatile. They are just going up slowly and steadily. Volatility is a good thing for short term focused managers–such as the majority of hedge fund managers. It doesn’t matter if the market is going up or down as long as it is moving fast. That’s the beauty of forcing your investors to contribute large amounts of cash–the price of short sales becomes inconsequential. And now that there is easy access to the Forex market, selling a currency short is even easier than selling a stock short. In other words, a good hedge fund can create wealth for you whatever is going on, as long as prices move faster than normal.

But that’s not happening in today’s economy. Prices just keep rising now, and at a slow pace. And while that’s good for the typical investor, it’s not good for hedge funds. One easy way to avoid this issue on a small scale is through binary options. It sounds weird to say that you can replicate the big wins of a hedge fund with tiny trades, but binaries do allow you to create big profits off of tiny amounts of movement. Now string together many of these little trades, and suddenly you are much better off than a hedge fund investor–especially because you don’t necessarily need to worry about volatility to make a profit. Volatility helps make your job easier here, but you only need a tiny amount of change in price to realize a big profit by comparison. This method has made trading available not only to the average person, but it has made success easier to come by, too.
Risk Disclaimer

Speak Your Mind

*