How to Invest in Hedge Funds

A growing number of people are beginning to wonder how to invest in hedge funds. They are well aware of the primary benefits, as well as the drawbacks, and feel that this is the best place for their money at the present time.

How to Invest in Hedge Funds

While you may have a strong interest in this type of investment, there are several details you need to be aware of before getting involved.

It may not sound fair, but hedge fund investing is not for everybody. This is not something that every “average Joe” can invest in. If this were the case, the allure of hedge funds would not be nearly as powerful.

If you’re interested in a better alternative to hedge funds, check out Insider Monkey’s innovative approach to hedge fund piggybacking.

Do you have the Money to Invest in Hedge Funds?

Above all else, there is one thing you need to know if you have the desire to invest in hedge funds: it is going to take a lot of money.

Generally speaking, you must be a wealthy individual to invest, typically with $1 million or more in net worth.

By learning more about the best performing hedge funds, including what each one invests in, you can begin to make a determination as to where to put your money.

Get Ready for Fees and Taxes

There is no easy way of putting this: the fees associated with hedge funds can be hefty, often times reaching 2 percent of your assets as well as up to 20 percent of profits. This is another reason why investing in hedge funds’ best stock picks is a better alternative than picking individual hedge funds.

Also, due to the trading patterns of hedge funds, you may be exposed to hefty tax bills.

Getting Started

If you are still convinced investing in a hedge fund is the right idea, here are several steps you can take:

1) Do your research to learn more about each fund, including its manager, holdings and past returns

2) Contact the hedge fund for more information on becoming a “member”

3) Make a decision, based on your investing strategy and the requirements of the fund, on how much you of an investment you are going to make

Hedge Fund Questions

If you have the money to invest in hedge funds and are not concerned with the fees and potential tax implications, your time has come. Here are a few questions to answer as you attempt to decide which hedge fund to invest in:

1) What is the funds track record?

2) Is the hedge fund manager well known for producing top level returns?

3) What are the fees associated with being part of the fund? Will these change?

4) How long do you have to commit your money?

Now that you know how to invest in hedge funds, it may not be long before you are rubbing elbows with the likes of Michael Novogratz, George Soros, and Eric Sprott.

Recommended Reading

Hedge Fund Research

What Are Hedge Funds?

The Top 10 Hedge Funds