Happy Monday everyone!
Market Mondays, brought to you by Legacy Investing & Wealth Management is a blog giving you a quick and easy read focusing on stock market education, empowering the newer investor as well as giving you the most recent stock market analysis. For more information including past blogs please go to www.LegacyInvesting.net; look for the Market Mondays tab under “The Legacy” for all blogs.
Let’s talk about hedge funds today. I used to hear that term from time to time but never knew what it meant. Basically, hedge funds are a fund ran by a group of Investment Advisers and are only open to people with deep pockets! The proper term is accredited investors who have more than $1 million in net worth or make over $200,000 per year. For married couples, at least $1 million in net worth or a combined income of over $300,000 qualifies them as accredited investors.
The reason people need at least this amount to qualify is because hedge funds are known for using some very high-risk strategies to hopefully make you money, or lose your money. They use strategies such as short selling, currency bets, risky options plays, etc. Funds typically charge 2% of assets as a management fee and they often take out the first 20% of all capital gain; a pretty hefty charge for this type of risk the investor takes on, wouldn’t you agree? Fyi – capital gains are the amount of money you’ve made from recent trades. Also, once you buy into a hedge fund there is a good chance you cannot sell it for at least one year, even if you’ve lost 50% of it….uuh, I’ll pass lol.
Now there are mutual funds called funds of hedge funds where a non-accredited investor can invest in. These mutual funds would have investments in several different hedge funds. As you probably imagined, the investor would not be able to sell this fund within a certain time period and they also involve high expenses, incurring the expenses of the hedge funds themselves and the expenses of the mutual fund.
It’s been a while since we’ve talked about the market but since the June 20th S&P 500 close of 2071, we are up significantly! This past Friday we closed at 2184 so anyone who was selling the market at the bottom of the Brexit situation, lost a lot of money. I try to encourage people to buy the stock market when we have a mini-crisis such as the market being totally surprised by an event like Brexit. For the new people Brexit was Great Britain’s decision to leave the European Union which caught everyone by surprise.
We have had over a 200 S&P point run higher since June 27th and I would not advise putting new money to work at this point. I would wait for a pull-back, then buy some of your favorite stocks, ETF’s or what have you. The market fear gage (called the VIX) is very low right now and when it’s this low it signals an imminent stock market pull-back or correction. Buying protection or insurance (in the form of options) for any positions you have in stocks would be a good idea just in case the market pulls back.
Please visit our website at www.LegacyInvesting.net and contact us today for a FREE consultation on becoming financially fit and learning how to make money investing in the stock market. You can make money in ANY type of market (bull or bear). When we meet I’ll give you more information about our services and find out what your financial goals are. If I can help you, we can move forward; if not, no problem but I’m always just a phone call away from any questions or quick advice you want. I can help get your finances in shape so let’s connect and build generational wealth together.
Disclaimer – Legacy Investing & Wealth Management LLC or any of its advisers are not liable in any way for any losses incurred through trading by readers of this weekly blog. Any information or strategies of trading suggested here involve risk of capital loss and this weekly blog is not considered investment advice. Individuals who invest in securities are solely and completely responsible for any and every outcome that may occur.