How to Size up Hedge Funds: 4 Common Pitfalls to Avoid

In an attempt to spice up their investment strategy, a lot of people make serious mistakes in sizing up the returns to be had from hedge funds. In fact, the customers as a group end up getting a lot less than they had bargained for.

The dangers of the domain are spotlighted by the fact that hedge funds have a way of going bust in droves. During their short lifespans, the performance of the survivors is nothing to write home about, either. According to rigorous studies of the domain, hedge funds on average turn in gross profits that are only comparable to those of mutual funds. On the other hand, the net returns to the customers of hedge funds trail far behind those of mutual funds.

There are several reasons for the discrepancy between the image and the reality in the marketplace. In this article, we examine the four types of pitfalls that lead investors astray.

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