The most successful hedge fund investment strategies hinge on having the right manager. Without the right hedge fund manager at the helm, even the best fund strategies can fall apart. Top performers are often well-recognized in the field, but choosing the right manager for your investment should be more than just a simple popularity choice. There are several factors to consider when attempting ensuring that your investment will be managed in a way that gives the best chances for impressive growth, while minimizing the risk of losses. Choosing a hedge fund manager that you know you can trust will give you a solid foundation for branching out into different types of hedge funds underneath the same stellar management. Experience Even the best hedge fund managers have to start somewhere. Most hedge fund managers have a specialization that has developed as a result of hands-on experience in the world of finance. Understanding how that specialization plays into his or her strategy can help you to understand why certain types of investments opportunities are favored over others. Also, this experience should provide an in-depth understanding of the workings of the market and how to reduce potential losses while still working towards continual positive returns. Past Successes/Failures While the triumphs of your potential hedge fund manager are likely to be prominently advertised, you also want to know about any past failures with regards to investment strategies. Understanding where things went wrong and gaining insight on better choices to make in the future are essential for successful fund management. Ideally, you want to choose someone who is able to admit mistakes quickly, and make corrections just as quickly - this will minimize your risk for big losses, and it also encourages transparency for investors in the fund. Current Strategies The financial markets are ever-changing, and you want a hedge fund manager who is flexible enough to change right along with them. Discussing potential worst-case scenarios can also help you to understand how your potential fund manager copes with the need to make quick decisions, and how much planning is involved in these decisions before they are made. When investing in this type of fund, you want to have full confidence that the strategies employed are timely, targeted, and carefully monitored. If there is anything that you don't understand, the hedge fund manager should be able to explain it to you in clear, succinct terms. Don't be afraid to ask for in-depth explanations, even if you think you understand most of the underlying strategy involved. It is important to be completely comfortable with the choice you make for your investments. Because these types of funds can carry a significant risk, you want to be able to rely on expertise, professionalism, and practical experience. Choosing the right hedge fund manager now means that you have a contact point for additional funds in the future as your returns grow and your investments expand. Take the time to choose someone you trust, right from the start. If you are looking for reliable institutional services to help you take charge of your financial success, look no further: Paradigm Capital Management offers online trading, investment banking, and a range of services for the most discerning professionals. Paradigm Capital Management provides its services to pension and profit sharing plans, investment companies, pooled investment vehicles, individuals, high net worth individuals, charitable organizations, corporations, and state or municipal government entities.
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Investing, nowadays, is not as easy as it might sound. Be it investing directly in equity or through mutual funds, every way requires a considerable amount of research and effort to choose the right stock or fund, manage it, and acquire returns. In case of mutual funds, it becomes difficult for a person if the chosen fund fluctuates according to the market condition. Yeah! We are talking about small-cap mutual funds here. These funds are too much volatile in nature and could easily leave their investors bewildered with their constant fluctuations.
But, one must not be risk averse and turn his back on the funds of this category. The most important thing that investors are required to understand is investment in equity comes with risk which changes in line with the size of company. Risk and returns are directly proportional to each other in case of small-cap funds. The more you dare to take risk, the more is the possibility of getting rewarded with high returns. From the past three years, we have been witnessing the exceptional performances of small-cap funds which have lured too many investors. But, some investors who are risk averse assume that these mutual fund investments are like pie in the sky because of obvious reasons. For these investors our experts at Paradigm Capital Management have some tips that can be kept in mind prior to the investment in these mutual funds. Research It Out It is a known fact that a fund's past performance does not guarantee its future performance. But that does not mean you should not do prior research about its investment strategy, fund manager, past performance, etc., before investing in it. Certainly, if you desire to acquire handsome returns by investing in small-cap funds, then you are required to spend sufficient time researching about it. Long-Term Investment Horizon is the Goal As discussed earlier, small-cap funds are highly volatile in nature and tend to fluctuate regularly with bear and bull phases of the market. So, investing in them with a short-term perspective is not a solution. You must work on the adage-'Patience is the key.' If you want to know how these funds have been performing, you have to look at their past 5 or 10 years' performance. So, if you are going to invest in these funds, you must invest for a long stretch of 5-10 years. All Eggs in One Basket- NO! Diversification is a capacious term which when applied to investing means buying more than one type of equity instruments. Diversifying a portfolio helps in distributing the risk and minimizing the losses. Because sticking to only one investment style which makes you hold on only small-cap funds could leave you with loss when the market goes down. A well diversified portfolio which contains a mix of stocks can help you enjoy profits even when these funds hit down. Timing the Market-NO, Time in the Market-YES! Timing the market has been considered a foolish activity by many of the financial industry experts. Timing the market is not only nerve-racking, but also risky for your investment portfolio. You can never predict the market and its certainties because you never know which factor will influence the market sentiments hence, driving it up and down. So, best way is to stay away from the habit of timing the market and start your investments as early as possible with a long-term goal. Investment Philosophy Suitability The investment philosophy that the fund follows must be in line with the portfolio objectives. This aspect of investment is very crucial during the times of heightened volatility. As being an investor staying patient at the time of market hit is very difficult, so if the investment strategy and philosophy must be in a way that should support your risk profile and investment objective. Though we cannot anticipate how a small-cap fund would perform in a particular market condition, but if you keep the above tips in mind, then investments in these funds will also be beneficial for those who fear high risk. If you haven't invested in mutual funds yet then you must seek your financial adviser's advice and start investing now. If you want to learn more, then consult with the experts at Paradigm Capital Management, Inc. Paradigm Management is a trusted leader in small cap investing and invests in value stocks of companies across all capitalization Contact at (518) 431-3500 |
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September 2018
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