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Investing in a Hedge Fund is Like Joining the Country Club

Yes, "successful" mutual fund and hedge fund managers are just lucky.  Here is the math.  Why they don't people invest in a boring fund like Vanguard's S&P 500 Index, or PIMCO Total Return?  Because then you don't get to say, "I invest with [insert prestigious hedge fund]."  You want the status of saying you're investing with a prestigious fund.Whether 2% of your principal and 20% of your profits is worth being able to say this.... is something only you can answer.  Incidentally, being able to say you invested in with Bernie Madoff used to mean something....  You also want to signal to others that you are sophisticated.  If I tell someone, "Well, I'm in 'SEF' now because I think the market is going down.  Once things settle down, I'll be back in index funds...continue to full post

Full post as published by Crime & Federalism on June 09, 2009 (boomark / email).