I ve started learning about the market but I dont know what hedge funds are. Please explain
In: 17
Hedge funds are used to reduce portfolio risk. Let’s say you have an investment portfolio of NASDAQ stocks. Most days some go up and some go down. But on a few days, they all go down. Wouldn’t it be cool to have an investment that went up when they all go down. This investment wouldn’t have to do anything on days where they were balanced up and down. Even if this investment went down when they all went up, as long as it was a minority position in your portfolio you’d still be happier. The point is to consistently make modest gains by avoiding losses rather than go all in and try to make huge gains while risking large losses.
Hedge funds are that “contrarian” investment. The people who run them bet against stocks that seem to be going up and invest in other instruments with behavior contrary to the rest of the market.
Like gamblers who bet Don’t Come, people who run hedge funds are disliked by most people in the market, because they make a lot of money when everybody else losses money. But in terms of making money, being popular isn’t really required.
Latest Answers