Hedge fund managers are considered (wrongly or rightly) the elite of the money managers. Their thoughts on investing are usually not generally available. In this post I reduce many conversations with hedge fund managers to themes that have come up over and over again.
Define risk as how much of your investment you could lose long term rather than the volatility or the ups and downs of the market. A share of Walmart bouncing up and down with the market is a lot less risky than an investment in a startup where you might get $0 back.
There is an element of luck to fund managers who are successful. Don’t count on people being lucky again. Skill is what counts in the long term, but it’s hard to tell skill from luck in the short term.
Go long term
Think about your investments for the long term. Investing over many years will give you an advantage over most investors who think about it in terms of a day to a few months out.
Ask about fees upfront — these will eat into your overall returns. No one knows anything in a moment of crisis. In the heat of a crisis (Lehman Brothers, 9/11, Brexit) even the best managers don’t know what’s going on. They position themselves beforehand to react to market upsets and do their best to make sense of things as the situation evolves.
Mallika Paulraj is the creator of The Superinvestar Framework which teaches investors how to make confident investment decisions. You can download your own copy of Ten Timeless Principles From The World’s Greatest Investors here. Her book How The Best Invest, which outlines the method, is available on Amazon.
Sign up to her weekly Four Minute Investing note via her website.