Investment Choices

Perhaps you study the newspapers, or even take the Wall Street Journal, and consider that your investment education is up to a good standard. However, there are many facets to your investment, and you need to be sure that the way you run your finances suits your risk tolerance, and allows you to meet your expectations.

For instance, while you are familiar with mutual funds you may not know so much about hedge funds. In fact, unless you are wealthy, you may not even qualify to invest in a hedge fund. The Securities and Exchange Commission, which in the main does not regulate hedge funds to anything like the same extent as mutual funds, requires that investors have a certain net worth or annual income before they can invest in a hedge fund, this qualification supposedly implying that the investor is in some way more knowledgeable or sophisticated.

If you do not qualify, why would this be of interest you? That’s because increasingly there are investment options available to you which emulate some aspects of hedge funds. You can buy certain mutual funds which are readily purchased, that have some of the attributes of hedge funds.

For instance, some hedge funds seek to achieve greater returns by leveraging the investment using derivatives and sometimes borrowing money to increase the stake. You can find mutual funds which also use derivatives to leverage your investment. Note that this is not necessarily a recommended investment, as it does increase the riskiness. You may not consider these types of investment strategies suitable for your retirement planning.

However, if you know how hedge funds aim to increase their returns, you may be able to use some of the techniques in your own investments. The advantage of this do-it-yourself approach is that you will not have to pay the high fees, such as 20% on the profits, which seem to be the normal charges when investing in a hedge fund. The better educated you are on your investment choices the more likely you are to achieve your goals.

Ken Himmler (www.kenhimmler.com) is an investment advisor who can discuss many different financial plans with you. If you go to the Integrated Asset Management website (www.iamllc.biz), you will get an idea of the range of securities and financial vehicles that are available.

Authored by Kenneth Himmler, Sr.