Notes Funds Are Superior For Hedge Funds

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Index Funds are Superior to Hedge Funds

In 2006, a hedge fund manager by the name of John Paulson realized the housing market and the value of subprime mortgages were grossly inflated and would be headed for a major fall. In the summer of 2007, the markets began to collapse, bringing Paulson early profits. By the year’s end, John Paulson had pulled off the greatest financial trade in history, earning more than $15 billion for his firm. He subsequently invested funds in gold share classes in 2010, but they did not perform as well as the firm planned, causing his net worth to drop $700 million (Zuckerman). These volatile situations can be avoided if individuals invest their time and money in index funds rather than hedge funds. The
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Both hedge funds and index funds stem from the idea of an independent mutual fund, but their potential to succeed is dependent upon the economy performing well. The success of all investments, whether a bull or bear market, are significantly driven by the performance of the overall economy. Economics explains how people interact within markets to gain what they want or to accomplish their goals. The market usually either has falling prices, which means a bear market and when flourishing this is referred to as the bull market. The United States is a market economy, which means the financial decisions and the pricing of goods and services are guided primarily by the aggregate interactions of a country 's citizens and businesses. In other words, market economies have little government intervention or central planning (Investopedia). In addition to the performance of the overall market, the returns for individuals are impacted by a company’s management team. The managers of investment funds either invest or trade investment instruments for the fund. Investing and trading are two different strategies to achieve investment returns. The goal of investing is to gradually build wealth over an extended period of time through the buying and holding of a portfolio of stocks, baskets of stocks, mutual funds, bonds and other investment instruments (Investopedia). “Trading, on the other hand, involves the more frequent buying and selling of stocks,
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