WHY FOLLOWING ETORO'S POPULAR INVESTORS IS BETTER THAN INVESTING IN A HEDGE FUND
If you have started following the world of finance, perhaps you have heard that even for the powerful hedge funds that dominate the world of finance, it is really difficult to outperform the market.
In general by "market" we mean the most well-known reference indices, such as the $SPX500 (although lately I prefer to refer to the $NSDQ100).
The main answer to why hedge funds fail to perform better than the market is probably because their goal is to make money and only secondarily to make their clients profit, and this has two major consequences:
1- Hedge Funds can have very high commissions that erode much of the profit;
2- The purpose of Hedge Funds is to try to arrive at the end of the year with a good performance that leaves their clients satisfied, especially in comparison with the benchmark and with other Hedge Funds, and to do this they tend to sacrifice earnings in the long run.
Point 2 is probably the key point: the goal is to do well by the end of the year and this can sacrifice the long-term performance of the fund enormously.
After all, it is understandable: dealing with a public that is not necessarily informed about how true value in the markets is mostly the result of the work of time, if a client sees a fund end up in the red, it takes very little to jump ship.
This is where the comparison with Popular Investors gets interesting (I am talking about PI, but really I am referring to any informed investor). Well, these investors have as their first objective not to finish the year in the black, but to make their account profitable over the long term; and since it is their own money that is being invested, making their investments profitable is absolutely a priority over having a few more or fewer copiers.
In many scenarios, especially in the case of directional investors as fundamental investors usually are, it is quite common to stay in the red for a long time, waiting for the market to recognize the quality of our investments.
Other advantages of Popular Investor over a Hedge Fund
- Size: The Popular Investor can invest in small and medium-sized equities, picking from a flood of companies that would otherwise be inaccessible to large funds due to the tight capital they would have to deal with.
- Affordability: high capital and accreditation requirements are required to invest in a hedge fund, whereas to copy a P.I. one only needs to have an account on eToro and choose the profile one prefers from the thousands available.
- Transparency: P.I. display their transactions, track record, returns, risks and objectives in real-time, allowing investors to monitor and evaluate their performance and investment style. In addition, popular investors are subject to eToro's rules and regulations, which guarantee the safety and security of users' funds.
- Increased interaction: popular investors are not only fund managers, but also opinion and community leaders, who communicate and interact with their followers and other users of the platform. This creates a collaborative and learning environment where investors can exchange information, opinions, advice and feedback, enriching their experience and knowledge of the market.
In a nutshell, IPs compared to hedge funds really seem to be David versus Goliath, but there are many arrows in their bow!
I'm @IlMatematico, add me to your watchlist to remain updated on all my news!
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Me pregunto si seria seguro etoro para que alguien invierta 50 mil dolares o mas ? Si ellos regresarian el dinero si se quisiera retirar ?... Show More Translate
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