Value investing has never been more popular.
Investors want to see their money grow and earn higher returns than the average.
But with all that investment capital flowing in, what exactly does it mean to invest in a hedge fund or alternative investment?
It’s important to know the basics before you jump in.
Value investing is a growing industry with millions of dollars of assets under management.
The following are some key terms to understand: Hedge fund: This is a firm that invests in an asset class that has high growth potential but is risky.
For example, hedge funds like Apple stock and Tesla stock have high growth but low returns.
Alternative investment: An investment that does not involve a traditional stock or bond.
For instance, there is a high growth asset like solar energy that is not directly related to stocks.
There are also other alternative investments that offer similar or lower returns than traditional stocks.
Asset class: An asset class usually represents the underlying value of a business or a company.
For most investors, this means a company that generates profits.
A small business or individual investor may want to invest money in an individual stock or ETF like Vanguard or Schwab.
Asset size: The amount of money invested.
For companies like Apple, a small investment may be as little as a few thousand dollars.
For other companies, it may be thousands of dollars or even billions.
The bigger an investment is, the higher the return.