I barely know anything about investing, but I thought the whole point of using a hedge fund is to beat the S&P 500 even after fees. My parents have been investing in this fund for 12 years. How can I figure out if they’re actually doing better than just putting the money into an index fund?
If your parents are with a hedge fund, they’re probably looking for specific strategies like reducing risk or diversifying. Beating the S&P might not even be their goal.
Blair said:
If your parents are with a hedge fund, they’re probably looking for specific strategies like reducing risk or diversifying. Beating the S&P might not even be their goal.
True, but have you looked into Warren Buffett’s hedge fund bet? It’s a good reference for this kind of thing.
@Pace
Wait, what’s Buffett’s hedge fund bet?
It’s about how index funds often outperform hedge funds in the long run. Definitely worth reading about!
Hedge funds aren’t necessarily about beating the S&P. They’re designed to hedge against market volatility. Like, if the market tanks, they shouldn’t drop as much. That’s the point.
Not every fund aims to outperform the S&P. Many are designed to minimize risk or provide steady returns. What are your parents’ investment goals?
Wil said:
Not every fund aims to outperform the S&P. Many are designed to minimize risk or provide steady returns. What are your parents’ investment goals?
You’re right; they’re probably aiming for safer returns as they get closer to retirement. Still, I want to check they’re aware of how it’s doing.
@Lex
Unless you have access to their statements, it’s tough to compare directly. But S&P 500 returns are easy to find online.
Look at risk-adjusted returns. If their portfolio is less volatile, then lower returns might be fine. Funds have different strategies, not all about growth.
You can’t just compare everything to the S&P. Indexes are aggressive. Your parents’ fund might prioritize lower risk, which makes sense for retirees.
If you want to compare, check their portfolio’s return since January and compare it to the S&P 500. Plenty of online calculators can help with this.
Ask them for performance reports. Compare inception-to-date returns with S&P. Don’t forget to consider fees—they make a big difference.
Most hedge funds don’t aim to beat the S&P. Their strategies are often about consistent returns, not high-risk high-reward investments.
Marlo said:
Most hedge funds don’t aim to beat the S&P. Their strategies are often about consistent returns, not high-risk high-reward investments.
Wait, so what’s the point then? Just to make money for the managers?
@Mai
Not really. Many hedge funds use strategies like arbitrage or event-driven investments. The goal is often steady returns in any market.
Sounds like your parents know what they’re doing. Maybe use this as a chance to learn from them?