You probably already know who Warren Buffett is. But have you ever wondered who’s in the same league as the legendary value investor himself?
A man called Ray Dalio.
If you’ve been in the investing game long enough, his name would definitely ring some bells.
Ray Dalio is the founder and co-CIO of Bridgewater Associates. He founded Bridgewater out of his apartment in 1975.
Bridgewater is now the world’s largest hedge fund, with about $150 billion in assets under management.
There’s definitely more than just the size of the fund to be amazed over.
Bridgewater posted returns for 2018 that not only outperformed benchmark indexes for various asset classes, but also many of its peers in the hedge fund industry.
The firm’s flagship Pure Alpha fund finished 2018 with a return of 14.6%, net of fees.
In comparison, the S&P 500 index was -4.38% for 2018 and Warren Buffett himself is known to publicly endorse index funds.
Now, the question we should be asking ourselves is: what gives funds like Bridgewater the edge and ability to outperform the Market, even when times are bad?
The answer lies in the strategy.
Fees aside, the key difference between a hedge fund and a mutual fund (or unit trust) is that hedge funds are usually less passively managed and their strategies make use both derivatives and leverage to generate exceptionally high returns. This is also known as alpha.
Sadly, hedge funds are mostly only accessible by accredited investors.
But the point here is, even as a retail investor, there are things which you can mimic from hedge fund strategies yourself, to generate alpha.
With the use of derivatives and leverage, hedge funds like Bridgewater have to utilise both long and short techniques.
Here’s where the difference lies between hedge fund strategy and the average retail investor’s strategy: shorting.
From our observations over the years, many retail investors we’ve met and connected with, are generally not receptive to the idea of shorting.
Don’t believe us?
Why else would you always hear that special phrase, “buy low, sell high” and never the other way around, “sell high, buy low”?
Perhaps, right now you’re asking yourself: can including shorting in my strategy really make me more money, especially during gloomy times?
Then, it’s time to try and test advanced strategies which hedge funds adopt, such as the long/short equity strategy. Of course, we strongly recommend you to try simulating it with virtual money first.
Now, there’s an opportunity for you test out such strategies that involve shorting, by just taking part in the upcoming simulation-trading competition – without having to fork out real money or taking real risks.
In fact, we’re giving you money instead as there’s up to $15,000 worth of prizes.
Start testing out some interesting trading strategies that hedge funds use and also stand a chance to win the latest iPhone 11 Pro by registering for this free competition which everyone is talking about.
Time to level up!
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