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Hedge funds post best start in 12 years as stock pickers take advantage of volatility
The above headline screams from a recent CNBC posting.
In a development typical of Wall Street, hedge funds are the diametric opposite of hedging. You put a hedge around your home to keep intruders out. Traditional hedging is a form of insurance. You buy home insurance to protect you from financial loss in case of fire, flood, storm damage and other disasters. The disasters can occur but insurance softens the blow. Hedge funds invite disaster.
They are not subject to the same regulatory restrictions that are imposed on mutual funds. They can take greater risks. To get higher returns, investors simply must take higher risks. The freedom to choose higher risks allows hedge funds to get spectacular returns, occasionally. They promote their spectacular returns so well that they can get away with charging two and twenty. Two and twenty? Hedge funds charge you a management fee of 2% of your portfolio value annually plus 20% of any portfolio growth.
Question for you. Do they share in any portfolio drop when it invariably happens? Remember, we are talking about Wall Street here. You know the answer!
So, let us look at their “best start in 12 years”. They rose 2.8% in January. It was their best start for the year since 2006!
Over the course of a decade, more than 90% of professional money managers fail to equal the S&P 500. This January, 69% of hedge fund managers beat it. Their best start in over a decade!
And how did our members do? At 5.7% growth during the same period, our performance is more than twice as good as that of the well-compensated hedge fund pros.
Will our members continue to outperform hedge funds? The Monday Morning Millionaire Program investing approach has done so for many years at this point. While there is no guarantee that it will continue to do so, don’t bet against it.