Netvest [www.netvest.com] assembles the country's most successful amateur investors, opens their portfolios, and displays their market insights directly to personal investors. These are their real portfolios and their insights really do shape their actual investment strategies.
I had a chance to interview Mona Carmody to learn more.
"Can you quickly explain what hedge funds are?
Simply put, hedge funds are investment vehicles designed to help one “hedge their bets” so to speak. Hedge funds attempt to shield investors from market risks while generating favorable returns in up or down markets. They do this by holding both long and short positions, thereby providing a layer of downside protection.
Why might they not be the best bet for investors?
Due to their complex nature, hedge funds are intended for the more sophisticated investor. With a few exceptions, these are high net worth individuals that must pass an "accredited investor" test. Hedge funds often boast of high returns that can be misleading. Fees can also be substantial and complicated. Finally, the value of assets under management can determine whether or not a hedge fund is required to register with the Security and Exchange commission, or in some cases, not subject to some of the regulations that are designed to protect investors.
How can investors with small pools of money maximize their returns?
One way is to leverage fees. This can be challenging for an individual that doesn’t have large cash outlays for investments. If investing in individual stocks, it can be tempting to look for stocks that trade at low prices to spread the fees over more shares. But just because the stock is cheap doesn’t mean it’s a smart investment. Regardless of the cost, I always do my homework. I stay away from penny stocks and always choose an investment that I plan to hold for at least five years. Personally, I recommend starting with companies whose products or services you’re familiar with. Nike was one of my first investments and I’ve held shares and have received dividends since 1998. Many companies offer direct purchase programs where you can invest a small fixed amount at regular intervals, often monthly, for a one-time fee. Investing in dividend paying stocks and then reinvesting those dividends is another great way to gradually build on small investments. 401k’s, or similar plans, are another great vehicle for investors with small pools of money. Individuals can start by contributing as little as 1% of their income, often with a dollar for dollar employer match, sometimes up to 6% of the employee’s contribution. To me, not taking advantage of a 401k with an employer match is like refusing free money. Regardless of whether or not there is an employer match, contributions are made pre-tax, which also serve to reduce taxable income in the current year. Finally, I highly recommend joining or forming an investment club. Investments clubs are a great way to pool money, leverage fees and learn about investing. The more I’ve learned, the better my returns have become. After all, no one cares as much about my money as me."
Why might they not be the best bet for investors?
Due to their complex nature, hedge funds are intended for the more sophisticated investor. With a few exceptions, these are high net worth individuals that must pass an "accredited investor" test. Hedge funds often boast of high returns that can be misleading. Fees can also be substantial and complicated. Finally, the value of assets under management can determine whether or not a hedge fund is required to register with the Security and Exchange commission, or in some cases, not subject to some of the regulations that are designed to protect investors.
How can investors with small pools of money maximize their returns?
One way is to leverage fees. This can be challenging for an individual that doesn’t have large cash outlays for investments. If investing in individual stocks, it can be tempting to look for stocks that trade at low prices to spread the fees over more shares. But just because the stock is cheap doesn’t mean it’s a smart investment. Regardless of the cost, I always do my homework. I stay away from penny stocks and always choose an investment that I plan to hold for at least five years. Personally, I recommend starting with companies whose products or services you’re familiar with. Nike was one of my first investments and I’ve held shares and have received dividends since 1998. Many companies offer direct purchase programs where you can invest a small fixed amount at regular intervals, often monthly, for a one-time fee. Investing in dividend paying stocks and then reinvesting those dividends is another great way to gradually build on small investments. 401k’s, or similar plans, are another great vehicle for investors with small pools of money. Individuals can start by contributing as little as 1% of their income, often with a dollar for dollar employer match, sometimes up to 6% of the employee’s contribution. To me, not taking advantage of a 401k with an employer match is like refusing free money. Regardless of whether or not there is an employer match, contributions are made pre-tax, which also serve to reduce taxable income in the current year. Finally, I highly recommend joining or forming an investment club. Investments clubs are a great way to pool money, leverage fees and learn about investing. The more I’ve learned, the better my returns have become. After all, no one cares as much about my money as me."
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