Growing their money in the most prompt, risk free and effective method is the key aim of each and every investor. Over the years, a great growth in the popularity of hedge funds as an investment option has been witnessed in the last few years. Within a short time period, this investment option has made its way into the financial portfolio of people across the world. Scott Tominaga underlines the fact that high involvement of investors in hedge funds is majorly due to the fact that it enables them to enjoy great returns in less time, while also having minimal risks associated with it,
Hedge funds are commonly referred to as a variety of investment partnerships. The term “hedge” has been basically derived from the various types of trading techniques used by hedge fund managers in order to grow their money through this investment vehicle. Scott Tominaga underlines that these fund managers typically “hedge” themselves by going long or by shorting stocks, in order to secure the maximum probable profits for the investors. Mr. Tominaga has multiple years of involvement in the domain of financial services, and therefore is quite well-acquainted with the aspects related to hedge fund investments. He has a very good idea about the hedging strategies that are commonly used to help investors to enjoy a high level of profits in a short period of time, while minimalizing investment risks. Some of those strategies are:
- Long – Short Equity: This is quite a popular equity strategy that is followed by the modern day investors. In the sphere of long/short portfolio, the various investors involved ideally get the chance to buy stocks of a company that is expected to outperform in the market. They generally also get the chance to promptly sell the stocks that may underperform in the future. The risks associated with such portfolios are usually quite low, as they have absolutely minimal dependence on the financial market. The key defining characteristic of long/short portfolio is the fact that they provide the investors with absolute returns, regardless of the market condition and performance prevalent.
- Market Neutral: This investment technique enjoys a number of similarities with the strategies associated with equity long-short funds. Much like the long-short portfolio, the performance of the market natural funds is also majorly independent of the prevailing market conditions. A great number of these funds are designed with the aim of eliminating or at least reducing the extent of market volatility. For the purpose of providing maximized returns to the investors, the market neutral funds generally use a bit of leverage.
- Convertible Arbitrage: This unique strategy involves investing in convertibles, and then shorting their underlying stocks. This investment vehicle enables the investors to buy the convertible debt of a company, and then go on to short-sell the stock of the same enterprise.
Scott Tominaga mentions that further details about these strategies can be easily found on the web.