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January 22, 2014

The Sad Truth About Hedge Funds

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There are many well-documented problems with investing in hedge funds, and it's hard to know where to start in pointing them out. Among them are: lack of liquidity; lack of transparency; loss of control over the asset allocation and thus risk of the portfolio; non-normal distribution of returns (they exhibit excess kurtosis and negative skewness); and they have a high risk of dying (12.3 percent per year from 1994 through 2008).

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Five Ways to Navigate the Index Fund

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As a proponent of passive or evidence-based investing, I am heartened by the growing number of people investing in index funds. According to a Morningstar article, “A Bull Market in Passive Investing,” only 12 percent of U.S. open-end mutual fund and exchange-traded fund assets were invested in passively managed funds as of Nov. 1, 2003. That percentage has risen to 27 percent, and it continues to grow.

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