As previously promised in the “What is a Hedge Fund?” video, I have written this article explaining how one can have his or her own hedge fund. Like most, I
was in complete disbelief when I heard that I could have my own hedge fund. Surprisingly, they are quite simple to set up and manage. Of course there are issues, especially in dealing with stocks, options, bonds, currencies, and commodities to trade. However, as previously stated, research is a must before embarking on any investment adventure. That is never truer than in the case of a hedge fun. In theory, if one allocated this as a larger portion of his or her portfolio, it can either make or break you more than in the case of smaller investments.
Now that we have thoroughly confused you, let’s back up and answer some of the basic questions.
First, why would someone want to run his or her stock/investment portfolio like a hedge fund? Also, will doing this actually provide benefits if it works, and if so, how well? The main logic in running investments like a hedge fund is to maximize gains. Take the example that is most common in the United States—fear. In a typical portfolio, people have grown so fearful of stocks they refuse to own any on an individual basis. They instead grow them through mutual funds, which are owned in the protection of an IRA or 401K, or both. While these decisions are made to reduce risk, they also reduce potential gains.
An important statistic to keep in mind is this: most mutual funds do not beat the S&P 500 on an annual basis. Another thing to keep in mind is that mutual funds are long stocks. What this means is that they go up when the market goes up. Like we all know, the market goes up and down all the time. Who wants to settle for only making money when the market is good? If you think this is as ridiculous as I do, you are likely shorting stocks. These allow you to borrow shares, and should the price go down, you make money. (For more information about shorting stocking, click on the video link Video Link). Additionally, mutual funds do not allow the diversity to use Forex and Options.
I have been talking about all the pros of a hedge fund, but I want to make one thing clear as well. I do have a 401K and IRA. These are just small parts of my portfolio, but because my employer matches my contributions up to a certain percentage, I keep them. Afterall, I can’t pass up a one hundred percent gain with the match. That being said, I do still contribute a larger overall percentage to my personal hedge fund, thus allowing me to optimize money for the largest potential gains.
While I do appreciate the financial gains, I must admit that being a part time trader is fairly difficult. Unfortunately, I learned this through mistakes and losing money. I didn’t do enough research or thorough research to be a financial genius. However, once I figured all of this out, investing became far easier.
To make the investing process simpler, I paid for an investing system that has a hedge fund manager that makes all the picks. Most importantly, the hedge fund manager does all the research. The cost benefit analysis was simple when I saw the growth in my portfolio, and the time I was saving. How does this all work? Just sign up for a subscription and link your Think or Swim account to the Davian Letter. This service is then auto-traded into your account. After everything is set up, it is as simple as just watching your money grow.
The stock system has made me 30 to 40 percent over the past few years. Despite all this, I still expect skeptics, but I want to put their minds at ease. Austin and I do not endorse products and services often, but when we do, they are the top of the line. If you do have any questions, more information can be found here or by emailing me at Chris@residualincomelife.com.
This will work, and work well. This is for you if you like the idea of making money in both up and down markets, and enjoy doing little work. The first step is to get rid of that fear and to just kind of jump in. Don’t be afraid to be different—everyone is settling for an IRA and waiting for forty plus years for a return on investment. Running your portfolio like a hedge fund is just one alternative.
I would advise, however, that as with any investment, risks are involved. Not every trade is going to be amazing. That being said, I have yet to find a better trading system.
Feel free to leave comments and questions below.