Wednesday, September 30, 2009

Crunch of Hedge Funds

After a Sweeping Wipeout at the Dawn of the Millennium, Hedge Funds Face a Patchy Future.

With increasing frequency, hedge funds have come to play a starring role in major blowouts in the financial arena. A showcase was the crash of October 2008, a debacle that wiped out trillions of dollars in the stock market, knocked down the banking system, and stamped out the routine loans needed by mainstream companies to go about their business.

In the wake of the deluge, the players in the hedge fund game collapsed by the thousands. Even so, the washout of the pools en masse will not spell the end of financial meltdowns. Rather, fresh waves of newcomers to the field are sure to step into the void and take up similar techniques. For this reason, blowouts of all sorts will continue to flare up in the future.

On a positive note, though, it is a straightforward task for the investor to avoid the dangers that plague the field of hedge funds. A healthy skepticism for dicey schemes and a disdain for excess leverage are the main traits needed to steer clear of the pitfalls.

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