Topic: How To Invest

What is Pat’s commentary for the week of January 5, 2016

Article Excerpt

Investment and consumer companies both work hard on their marketing, because it can attract customers and spur sales. But marketing can do a lot more damage with investments than with dish soaps, since it can make an inherently risky investment look safe. Consider “hedge fund investing”. The term “hedge” suggests a balanced approach, as in “hedging against inflation”. But hedge-fund strategy includes short-selling, derivatives trading, margin trading and other highly speculative financial maneuvers. Hedge-fund managers use these maneuvers to offset (or, in some cases, amplify) the risks of investing in stocks. This combination can work well for years, but the speculative element carries a hidden risk. At unpredictable moments, this risk flares up and the strategy backfires. This can turn a seeming investment haven into a financial nightmare. Hedge funds did well in the soaring markets of the 1990s. Their returns stalled in the last decade. In the past few years, they failed to keep up with the rising market. Last year,…

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