Possible answers: It's about learning how to learn? ~OR~ You can't teach talent? ~OR~ If they didn't know math, what would they fill in the letterhead with?
The only reason it works is because hedge funds are able to avoid just about every good practice required of mutual funds and publicly traded securities, including transparency, regular mark-to-market, and liquidity and immediate redemption requirements. You do not immediately drop off the face of the earth because your investors (1) couldn't sell if they wanted to, and (2) don't know their shares' net value after liabilities are subtracted.
See the record of leveraged mutual funds for plenty of examples of what happens when similar practices are followed in a manner that's fair and transparent to the investor.
Yup. I just wonder if people will eventually catch on. If you're rich enough to invest in a hedge fund, you're probably rich enough to tap the derivative markets and do it yourself...
I don't imagine that the proportion of rich people who catch on is going to change anytime soon. The psychological effect of marketing to the effect of "This fund is super-exclusive and you are part of the lucky and very small subset of the population who can actually invest!" is disturbingly huge.
Well, and there's also the fact that the system is actually biased in *favor* of this sort of thing, since we don't allow the very largest funds (investment banks) to go under. So putting money into them may actually be quite rational.
I'm a strong believer in the efficient market hypothesis. I believe that the job of a financial advisor is to help you find investments that best fit your particular circumstances
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Heh, that's a bit tricky. On the one hand, I agree with you in the sense that picking stocks is a stupid game, and anyone who claims to be able to do it is probably lying.
On the other hand, the efficient-market hypothesis, taken literally, is self-evidently false, and the unqualified belief in it has caused enormous damage over the last twenty years or see.
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It's about learning how to learn?
~OR~
You can't teach talent?
~OR~
If they didn't know math, what would they fill in the letterhead with?
Reply
See the record of leveraged mutual funds for plenty of examples of what happens when similar practices are followed in a manner that's fair and transparent to the investor.
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There's a sucker born every minute.
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...oh wait.
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On the other hand, the efficient-market hypothesis, taken literally, is self-evidently false, and the unqualified belief in it has caused enormous damage over the last twenty years or see.
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