High-risk Investments and Retirement Gifts
Everyone knows that the perfect retirement gift to give
to oneself is a formidable retirement plan. Nowadays, the
American market is struggling with the housing bubble and is
only able to get meager gains; this means that stocks are being
valued less than one wants it to be. One may look towards
high-risk investments like oil-well partnerships, direct
investments and foreign currency ETFs to get the superior gains
to offset the weak gains of traditional investments.
And if deep inside, you’re a daredevil, you may venture into
hedge funds target to retirement investors or mutual funds that
make use of hedge fund strategies to help future retirees
generate sufficient income come 65.
But given the falling market and the benefits (and huge
risks) that these kinds of investments present, should one
venture into these? Before we answer that question, let’s look
deeper in the world of these “sophisticated” investments.
The Roller-Coaster World of Hedge-Funds
If you’ve only read about the good side of hedge funds,
you’ve probably heard about the superstar investors behind them
that get paid huge sums by clients and assure superior gains in
their investments in return, regardless if stock prices are
rising or falling.
But the problem is, finding these superstars is a huge
issue, since consistent performance isn’t assured, given the
complexity of the investing world. Yes, it may contribute a lot
from the outset, but the chances of continued returns are
unlikely. Also, hedge funds are very unreliable in the sense
that they lag behind others in terms of “survivorship bias”,
which means that hedge fund database don’t include the returns
of business that have flamed out or have simply stopped posting
results.
One should also consider the great difficulty in handling
these kind of funds. Great timing is needed especially in ETFs
that let you buy and sell foreign currencies, which helps you
profit from ups and downs in the market. This entails extensive
reading of events in other countries and finding one that has
high currency volatility in order to get the best return
possible.
High Costs
You probably haven’t heard about the costs of being a hedge
fund owner. These funds usually charge around 1 to 2 percent of
assets plus 20 percent or more from profits in these funds. If
you spend on a fund that spreads its assets on numerous hedge
funds, you’ll also pay fees for each hedge fund involved. This
system of charging clients simply decreases the always-hyped
returns that hedge funds give.
Given the huge fixed costs of these investments, it is
likely that one day you might find yourself with big losses
from investing too much on these. So to speak, this might
damage your retirement than fully enhance it.
Stick to the Basics
With all the problems and costs associated with these kinds
of investments, it is still better to ignore their tempting
call and stick to mutual funds. Of course, they pay lower fees
compared to the astronomical ones in the carnival-esque world
of high-risk investing. Yes, these “basic” investments still
involve risk, but tracking corporations is way easier than
keeping watch of foreign currencies and economies.
In the long run, the seemingly little gains that you get
from these simple investments may pile up into something that’s
enough to spend your final years in life with a Cristal in
hand.
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