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What does net long mean?

Investors are net long when they own more long positions than short positions in a security, derivative, or fund. It could mean that a fund manager, for instance, is net long on all of the holdings in the funds, i.e., the fund holds more long positions than short positions. Some funds could be the opposite and be net short. A long position - or to be “long a stock” - means that an investor has share ownership and will receive economic benefit if the share price rises, and vice versa. Creating and maintaining a long position is simple: an investor buys and owns the investment. Some asset managers will employ a “long-only” strategy, only buying and selling securities in the portfolio as a management strategy - they will not use options or shorting strategies as a result. Continue reading...

Who Manages ETFs?

Several large and well-known investment banks and companies are major players in the ETF industry. There are several large investment houses which specialize in managing ETFs such as Barclays, ProShares, Vanguard, and Guggenheim Partners, LLC. ETFs are also managed by investment firms such as Schwab, Credit Suisse, and Eaton Vance. Even New York Life’s Mainstay Investments recently acquired Index IQ. The ETF industry has been growing rapidly in the last 10 years, with more investors choosing to use them, more ETFs on the market, and more investment companies choosing to offer them. Continue reading...

Where can I find information about hedge funds and their performance?

Not all hedge funds are obligated to disclose their holdings, trades, or performance. About half of them are, however, and their performance can be found online through Morningstar and other sources. This information may not be as detailed as you would like, and you may try other means. Since the Dodd-Frank Act in 2010, more information about hedge funds is available to the public. This does not mean that all the information you seek will be readily available, however, and there are many hedge funds that do not make their information public. Continue reading...

What is a market neutral fund?

Market neutral funds might be hedge funds or mutual funds or ETFs whose strategy is not based on bullish or bearish market predictions but instead seeks to be in a position to profit whether the market goes up or down. Most mutual funds and ETFs out there are inherently bullish — you invest in those funds because you believe or hope that the industry or geographic region or cap-size that they invest in will grow in the future. Some funds offer bears a place to hole-up when the bubble inevitably bursts (or so they think). Continue reading...

What are Mid-Cap Mutual Funds?

Mid-cap mutual funds invest in medium-size companies. A middle capitalization mutual fund invests mostly in medium-size companies. While the definition of “medium-size company” varies, most professionals define it as a company with a market capitalization from $2 billion to $10 billion. Companies you may have heard of within this size range are Eaton Vance, Guess, and others. In general, mid cap companies are more volatile than large cap companies, and the choice of the right fund managers becomes more important. Continue reading...

Is there a Benefit to Self-Managing?

An investor may be able to save money in management fees self-managing, but there are also limitations and risks. Perhaps the biggest risk is the role that emotion can play in investing. Even the most skilled professionals are tempted by emotions in the market - big declines like the financial crisis can make one second-guess whether the market has hope of recovering, and big gains can create confidence that leads to less prudent risk-taking. Continue reading...

What is active management?

Active management is the practice of attempting to outperform the market with selection and timing. Active management is a thoughtful and time-consuming approach to investing and is the opposite of Passive management. Active managers seek to outperform the benchmarks for their portfolio by researching and selecting stocks and other assets based on strategies and analysis methods thought to be superior. Continue reading...

What is an Investment Manager?

An investment manager’s job is to adhere to the guidelines set forth in a prospectus while directing the decision-making process for a pooled investment company such as a mutual fund. He must remain accountable to the shareholders and observe SEC regulations while attempting to generate the best returns possible. Investment managers direct the flow of assets and trading in an investment account, usually a pooled investment using the funds of various numbers of investors, while seeking to serve the best interests of the investors whom he serves. Continue reading...

How Do I Find the Best Mutual Fund?

It requires a great deal of due diligence, but investors should understand that past performance is not indicative of future performance. Focus on experience. In the stock market, as with most things in life, hindsight is 20/20. There are countless lists on the internet with titles like “The Best Mutual Fund Families” and “50 Winning Mutual Funds.” It is important to understand that the names on those lists are a function of hindsight and not foresight. Continue reading...

What are Actively-Managed ETFs?

At their conception, ETFs only tracked indexes, but today there is also demand for actively-managed ETFs. ETFs tend to look a lot like passive index mutual funds, except that they can trade intra-day like stocks, while mutual funds only settle within 24 hours. In the last decade or so, there has been an increasing market for actively-managed ETFs as well. It is somewhat ironic that the popularity of actively-managed mutual funds has decreased while an abundance of actively-managed ETFs has appeared. The popularity of ETFs has grown enough for fund managers to attempt more and more things. Continue reading...

What is active money management?

Active management is when an investor or money manager attempts to outperform an index or benchmark, using tactical strategies. Many economists and financial professionals believe that the markets are efficient. This means that all available financial information has already been built into the prices of securities, and that you cannot outperform the market by making specific selections of stocks, timing the market, reallocating your assets regularly, following the advice of market pundits, or finding the best portfolio managers. Continue reading...

What can I find out about hedge funds?

Hedge funds have historically been very secretive. They still mainly fall under Regulation D and private-placement laws, but their reporting requirements have been slightly expanded after the Dodd-Frank Act in 2010. Now, they are a little more transparent, but not fully. Up until the Dodd-Frank Act, it was basically impossible to know what hedge funds were investing in and who was involved. Hedge fund managers and their investment banks were under no obligation to report the holdings, and they generally avoided leaking any information about their market positions for fear of damaging their advantages. Continue reading...

How old should my portfolio manager Be?

While we do not doubt that a young advisor can be intelligent and helpful, there is really no substitution for experience and tenure. Generally speaking, it’s a good idea to choose a manager who has experienced various market cycles. Younger advisors who have never helped their clients through a recession may not be as humble, prudent, or knowledgeable as ones who have. If you can find an advisor with over 10 years of experience, we would recommend that over an advisor with only 3, all other things being equal. There are advisors and wealth managers with only a few years under their belts but who have learned a lot in a short time. Continue reading...

Who are Some of the More Well-Known Investment Managers?

There have been many notable investors who have withstood the test of time. Of those that are still living, Warren Buffett definitely stands out of the crowd. If you had invested $1,000 with him in 1965, the investment would be worth over $6 million today. Some of those who could be considered in the realm of "founding fathers" of sound investment strategy would include J.P. Morgan, Benjamin Graham (author of the famous "The Intelligent Investor"), and John Templeton. Continue reading...

What is the difference between active and passive money management?

The debate on whether active or passive management is better for investors has polarized many advisors and theorists for years. There are two schools of thought when it comes to long-term investing. One basically states that you should determine a proper allocation of asset classes for yourself, buy index funds to reflect each particular asset class, and possibly rebalance the portfolio periodically. This basically means “set it and forget it,” and the investor must be willing to ignore fluctuations in the markets and maintain a faith in an Efficient Market. Continue reading...

What are Mutual Funds?

Mutual funds are managed portfolios of stocks and bonds, where the portfolio manager uses pooled investor funds to manage the portfolio. In the U.S., the first mutual fund was created in 1924 when three investors in Boston pooled their money and formed the Massachusetts Investors’ Trust. The essence behind Mutual Funds today is the same – a pool of money is collected from a number of investors and then professionally managed. Continue reading...

How can I invest in hedge funds?

Fund managers are allowed to accept up to 35 non-accredited investors, but for the most part you will either need to satisfy the “accredited investor” requirement of the SEC to invest directly in a hedge fund. Otherwise, there are now hedge fund indexes and ETFs that track and mimic hedge fund strategies that are accessible to everyone. You should know now that the minimum initial investment requirement to participate in a hedge fund can be quite large, such as upwards of $1 million. Continue reading...

What are Specialty Funds?

Specialty funds may be completely unique and offer investors a strategy that they cannot find elsewhere, or they may just represent a strategy with an extremely narrow focus. There are many Specialty Funds, and their investment strategy is bounded only by the imaginations of the companies who create them. They tend to focus on markets that an investor may not have any exposure to otherwise, such as the Ultrashort Japan Fund. Continue reading...

What are Alternative Funds?

The idea with Alternative fund investing is to gain exposure to assets which are not highly correlated with the rest of your portfolio, and which use non-traditional approaches to fund management. Alternative Funds are mutual funds that invest in non-traditional asset classes such as commodities (gold, silver, oil, etc.), agricultural products (cocoa futures, orange futures, pork-belly futures), non-publicly traded companies and limited partnerships, and so on. Continue reading...

What are Balanced Funds?

Balanced funds offer a well-diversified investment that includes relatively equal exposure to stocks and bonds. Balanced funds combine stocks, bonds, and money market instruments to give investors some upside potential along with a goal of capital preservation. While they are considered to be safer, they also have more modest returns in most market environments, because, of course lower risk investments have lower potential returns. Continue reading...