Investment Strategies and Other Factors

by John_S on May 1, 2014

There are different types of funds to consider as alternatives to traditional investment instruments. Some funds focus on long-term capital growth while others offer benefits such as a balanced mix of liquid and illiquid investment instruments. Hedge funds also offer benefits such as comparatively lower leverage and higher liquidity, but there are risks and disadvantages such as transparency and liquidity.iStock_000008642715XSmall

Consumers often invest in hedge funds to benefit from strategies such as arbitrage and selling short and to grow their savings. Hedge funds offer downside protection meaning that they help improve the customer’s return and risk profile. The main downside for investors is that managers are allowed to borrow large amounts of money, and this can lead to poor performance. Another problem is that regulatory bodies and investors themselves are unable to keep track of performance. Managers take more risk to improve performance because their fees are also based on the fund’s performance and returns. Investing in a mutual fund is one alternative, but it is important to weigh the risks and potential problems. Mutual funds come in different varieties and invest in money market instruments, bonds, stocks, and other investment vehicles. One of the main benefits of mutual funds is that they are structured as liquid investment vehicles.

There are some limitations, however, and one is that they can be traded at the end of the day. The fact that there are no sales commissions or transaction fees makes mutual funds popular with investors (http://www.canadabanks.net/default.aspx?article=Investing+in+Mutual+and+Hedge+Funds). They also allow subsequent investments and invest in different asset classes, which translates into automatic improved diversification. When looking into mutual funds, investors take into account factors such as risk-to-return, performance, investment solutions, and others. Managers use different investment strategies and often consider factors such as growth, value, and yields. Whether to invest in mutual funds depends on your investment goals – to grow your savings, save for retirement, or anything else. Ongoing fees and charges are one factor to consider. Investors are often unaware of the tax consequences, and this is one factor to consider. Make sure you ask about the operating fees as well.

Besides mutual and hedge funds, investors have plenty of solutions and schemes to choose from, including high-interest savings accounts, certificates of deposit, Forex trading, and others. While stocks are more volatile, bonds are safe to invest in. There are other types of investments such as futures, options, and so on. Make sure you consider the costs, fees, limitations, amount required, and other factors.

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