Is it possible to make quarterly returns in hedge funds?
Your edit indicates that you may not yet be ready to get heavily involved in investing. I say this because it seems you are not very familiar with foundational finance/investing concepts.  The returns that you are seeing as 'yearly' are just the reported earnings every 12 months, which all public companies must publish. Those 'returns' are not the same as the earnings of individual investors (which will be on the basis of dividends paid by the company [which are often annual, sometimes semi-annual, and sometimes quarterly], and by selling shares purchased previously. Note that over 3 months time, investing in interest-earning investments [like bank deposits] will earn you something like 0.5%. Investing in the stock market will earn you something like 2% (but with generally higher risk than investing in something earning interest). If you expect to earn significant amounts of money in only 3 months, you will not be able to without taking on extreme levels of risk [risk as high as going to a casino].  Safe investing takes time - years. In the short term, the best thing you can do to earn money is by earning more [through a better job, or a second part-time job], or spending less [budget, pay down high interest debt, and spend less than you earn]. I highly recommend you look through this site for more budgeting questions on how to get control of your finances. If you feel that doesn't apply to you, I encourage you to do a lot more research on investing before you send your money somewhere - you could be taking on more risk than you realize, if you are not properly informed.
Well, you're obviously wrong.  Anyone can start a hedge fund if they go through the proper ropes and get certified.  I had my paperwork done through a company called Hedge Fund Dynamics, which I would never, ever recommend because they didn't deliver anything on time and I ended up starting at about the worst possible time.  Other than that, all you need is a prime broker, and an outside accountant to do your taxes and reporting. First, I suggest that the route gives you the discount. You work the block with goldman and they say that if you work 20 blocks with them you get 50bps back, regardless of the issue.  Also, as a hedge fund you have a very different model than an ETF or MF.  That said, how exactly would that this be disclosed to the investor? Is there a standard in place for that? There is no margin call. Inverse ETFs use derivatives that would lose value in the case you describe though this doesn't force a margin call as you may be misunderstanding how these funds are constructed. This was the day traders dilemma. You can, on paper, make money doing such trades. But because you do not hold the security for at least a year, the earnings are subject to short term capital gains tax unless these trades are done inside a sheltered account like a traditional IRA.  There are other considerations as well: wash sale rules and number of days to settle.  In short, the glory days of rags to riches by day trading are long gone, if they were ever here in the first place.  Edit: the site will not allow me to add a comment, so I am putting my response here: Possibly, yes. One big 'gotcha' is that your broker reports the proceeds from your sales, but does not report your outflows from your buys. Then there is the risk you take by the broker refusing to sell the security until the transaction settles. Not to mention wash sale rules. You are trying to win at the 'buy low, sell high' game. But you have a 25% chance, at best, of winning at that game. Can you pick the low? Maybe, but you have a 50% chance of being right. Then you have to pick the high. And again you have a 50% chance of doing that. 50% times 50% is 25%. Warren Buffet did not get rich that way. Buffet buys and holds. Don't be a speculator, be a 'buy and hold' investor. Buy securities, inside a sheltered account like a traditional IRA, that pay dividends then reinvest those dividends into the security you bought. Scottrade has a Flexible Reinvestment Program that lets you do this with no commission fees. It's actually quite simple. You're actually confusing two concept. Which are taking a short position and short selling itself. Basically when taking a short position is by believing that the stock is going to drop and you sell it. You can or not buy it back later depending on the believe it grows again or not. So basically you didn't make any profit with the drop in the price's value but you didn't lose money either.  Ok but what if you believe the market or specific company is going to drop and you want to profit on it while it's dropping. You can't do this by buying stock because you would be going long right? So back to the basics. To obtain any type of profit I need to buy low and sell high, right? This is natural for use in long positions. Well, now knowing that you can sell high at the current moment and buy low in the future what do you do? You can't sell what you don't have. So acquire it. Ask someone to lend it to you for some time and sell it. So selling high, check.  Now buying low? You promised the person you would return him his stock, as it's intangible he won't even notice it's a different unit, so you buy low and return the lender his stock. Thus you bought low and sold high, meaning having a profit. So technically short selling is a type of short position. If you have multiple portfolios and lend yourself (i.e. maintaining a long-term long position while making some money with a short term short-term strategy) you're actually short selling with your own stock. This happens often in hedge funds where multiple strategies are used and to optimise the transaction costs and borrowing fees, they have algorithms that clear (match) long and short coming in from different traders, algorithms, etc. Keep in mind that you while have a opportunities risk associated.  So basically, yes, you need to always 'borrow' a product to be able to short sell it. What can happen is that you lend yourself but this only makes sense if: Yes it is viable but uncommon. As with everything to do with investment, you have to know what you are doing and must have a plan. I have been successful with long term trading of CFDs for about 4 years now. It is true that the cost of financing to hold positions long term cuts into profits but so do the spreads when you trade frequently. What I have found works well for me is maintaining a portfolio that is low volatility, (e.g. picking a mix of positions that are negatively correlated) has a good sharpe ratio, sound fundamentals (i.e. co-integrated assets - or at least fairly stable correlations) then leveraging a modest amount. This isn't totally wrong- there are hedge funds that are long 150% of AUM and short 50%. However, Rentech has said that holding a position for 8 seconds is long for them, so that's not what they're doing. I'd assume the 4X leverage most just refers to option positions that have delta 4 on average. They also may be borrowing money, which they can probably do extremely cheaply since they have a 35 year track record showing they're essentially risk-free. "Hmm, this would seem to be impossible by definition.  The definition of an ""index fund"" is that it includes exactly the stocks that make up the index. Once you say ""... except for ..."" then what you want is not an index fund but something else. It's like asking, ""Can I be a vegetarian but still eat beef?"" Umm, no. There might be someone offering a mutual fund that has the particular combination of stocks that you want, resembling the stocks making up the index except with these exclusions. That wouldn't be an index fund at that point, but, etc. There are lots of funds out there with various ideological criteria. I don't know of one that matches your criteria. I'd say, search for the closest approximation you can find. You could always buy individual stocks yourself and create your own pseudo-index fund. Depending on how many stock are in the index you are trying to match and how much money you have to invest, it may not be possible to exactly match it mathematically, if you would have to buy fractions of shares. If the number of shares you had to buy was very small you might get killed on broker fees. And I'll upvote @user662852's answer for being a pretty close approximation to what you want." I am not aware of any hedge funds that measure themselves using the sharpe ratio. The sharpe ratio measures risk relative to the risk free rate, and I don't believe there are any huge funds that consider themselves risk free.   Hedge funds or CTAs will use information ratio using excess return compared to a relevant benchmark. The Sharpe ratio is, perhaps, the method you are looking for.  That said, not really sure beta is a meaningful metric, as there are plenty of safe bets to be made on volatile stocks (and, conversely, unsafe bets to be made on non-volatile ones). "So it's not always what degree of risk you want be exposed to, but what *type* of risk. So let's say you were happy with the S&amp;P 500 ETF but you wanted to avoid oil stocks, so you combine that ETF with some derivatives that profit if oil goes down and you will outperform the S&amp;P 500 on a net basis.  Hedge funds can be very crafty with what exposure they want. They include a LOT of different strategies, so it's kind of incorrect to group them into one ""asset class"" per se.  As for the question if hedge funds are worth it? Well if the market tanks, you might find your hedge fund's performance to be very positive (ex: Kyle Bass made big money with the crisis)." This. Everyone knows it is impossible for more than a handful of VERY well-funded hedge funds to actually run computerized trading operations that actually outperform the market significantly, and then that advantage is very difficult to defend.  Any hedge fund that just depends on traders that outperforms consistently is very likely to be cheating. The 2 and 20 rule is a premium arrangement that hedge funds offer and venture capital funds offer, and they also offer different variations of it. The 2 is the management fee as percent of assets under management, the 20 is the profit cut, which they only get if they are profitable. There are 0/20, 1/15, and many variations. You're assuming that nobody offers this arrangement because it isn't offered to you, but that's because nobody offers it to people that aren't wealthy enough to legally qualify for their fund. When you park 6 or 7 figure amounts in bank accounts, they'll send your information out to the funds that operate the way you wish they operated. Leveraged ETFs are prone to volatility decay, also known as leverage decay: http://blog.quantumfading.com/2009/07/12/measuring-leveraged-etf-decay/ You can increase your chances by using a non-leveraged short ETF like TBF or simply shorting the long ETF. Beware: shorting bonds ETFs will result in you having the pay the dividends, which can be substantial. Edit: SBND has recently appeared on the market. It is leveraged 3x monthly. In theory, monthly leverage should be less destructive than daily leverage. A hedge fund is such a broad term as to not mean anything in practice. What do you find interesting in finance? Research that, understand that. Then go find the guys who are doing that and ask for a job and take it regardless of how much money it offers. The money is the yardstick, not the goal