What is a hedge fund? How do you invest in it? And is that risky? These are some of the questions I’m going to answer for you.
00:00 You want to play the game of the hedge funds, but you can’t join because you don’t have thousends of dollars. WRONG! You don’t need a lot of money to join this game! Let me tell you why.
00:56 What is Hedge Funds?
A hedge fund is basically a pooled investments vehicle that has a huge sum of investments from investors who give people money, so they can make more of it.
The goal of a hedge fund manager is to make money within a year.
The reason why a hedge fund manager needs to make money with huge amounts of money is:
1. The hedge fund manager himself can make a profit.
2. He makes the promised profit for you.
02:08 Is Investing in Hedge Funds Risky?
Investing may always be risky as no one can really predict the future. But we can make an educated prediction based on certain facts and figures.
Let’s pretend I’m a hedge fund manager, and I have a $100M to invest. And if my educated prediction of a certain opportunity will give me 3% return on my $100M.
That would mean, I could get 3 million dollars, just like that.
But if I can borrow money and use that debt to invest, that would make an even more interesting opportunity.
Because, if I would borrow another $100M, with that $200M invested in that particular opportunity, I could get $206M with that same 3 % return.
The other way around is also possible. As I could have taken on a debt. Instead of the market going up, it went down. And then I would have lost the investment as hedge fund manager.
Meaning for you as an investor your investment might be lost, just like that. Making the investment far more risky.
04:02 Why are They the Biggest Hedge Fund?
Wallstreetsbets has currently 8 million users. If all 8 million people invest in the same stock, they have the power to drive up the price of stocks, as long as they decide together. And that makes this whole game of investing for me. Because you, as an amateur investor, can just join the herd.
05:17 The Future of Investments.
When we take a look at the stock market, there will always be ups and downs. That’s nothing out of the ordinary. But the stock market cycles actually show that about every 8 years a full cycle has passed by. If you have this knowledge the only thing for us as investors to do is to use this to our advantage.
Why WallStreetBets Has Become the Largest Fund in the World