I am trying to start a “hedge fund,” and by that, I really just mean I have a very specific and somewhat simple investment thesis that I want to
"Kudos for wanting to start your own business.  Now let's talk reality. Unless you already have some kind of substantial track record of successful investing to show potential investors, what you want to do will never happen, and that's just giving you the honest truth. There are extensive regulatory requirements for starting any kind of public investment vehicle, and meeting them costs money.  You can be your own hedge fund with your own money and avoid all of this if you like.  Keep in mind that a ""hedge fund"" is little more than someone who is contrarian to the market and puts their money where their mouth is.  (I know, some of you will argue this is simplistic, and you'd be right, but I'm deliberately avoiding complexity for the moment) The simple truth is that nobody is going to just give you their money to invest unless, for starters, you can show that you're any good at it (and for the sake of it we'll assume you've had success in the markets), and (perhaps most importantly) you have ""skin in the game"", meaning you have a substantial investment of your own in the fund too.   You might have a chance at creating something if you can show that whatever your hedge fund proposes to invest in isn't already overrun by other hedge funds.  At the moment, there are more mutual and hedge funds out there than there are securities for them to invest in, so they're basically all fighting over the same pie.  You must have some fairly unique opportunity or approach that nobody else has or has even considered in order to begin attracting money to a new fund these days.  And that's not easy, trust me. There is no short or easy path to what you want to do, and perhaps if you want to toy around with it a bit, find some friends who are willing to invest based on your advice and/or picks.  If you develop a track record of success then perhaps you could more seriously consider doing what you propose, and in the meanwhile you can look into the requirements for laying the foundations toward your goal. I hope you don't find my answer cruel, because it isn't meant to be.  I am all about encouraging people to succeed, but it has to start with a realistic expectation.  You have a great thought, but there's a wide gulf from concept to market and no quick or simple way to bridge it. Here's a link to a web video on how to start your own hedge fund, if you want to look into it more deeply: How To Legally Start A Hedge Fund (From the Investopedia website) Good luck!"
For a non-technical investor (meaning someone who doesn't try to do all the various technical analysis things that theoretically point to specific investments or trends), having a diverse portfolio and rebalancing it periodically will typically be the best solution. For example, I might have a long-term-growth portfolio that is 40% broad stock market fund, 40% (large) industry specific market funds, and 20% bond funds.  If the market as a whole tanks, then I might end up in a situation where my funds are invested 30% market 35% industry 35% bonds.  Okay, sell those bonds (which are presumably high) and put that into the market (which is presumably low).  Now back to 40/40/20.   Then when the market goes up we may end up at 50/40/10, say, in which case we sell some of the broad market fund and buy some bond funds, back to 40/40/20.  Ultimately ending up always selling high (whatever is currently overperforming the other two) and buying low (whatever is underperforming).   Having the industry specific fund(s) means I can balance a bit between different sectors - maybe the healthcare industry takes a beating for a while, so that goes low, and I can sell some of my tech industry fund and buy that.   None of this depends on timing anything; you can rebalance maybe twice a year, not worrying about where the market is at that exact time, and definitely not targeting a correction specifically.  You just analyze your situation and adjust to make everything back in line with what you want. This isn't guaranteed to succeed (any more than any other strategy is), of course, and has some risk, particularly if you rebalance in the middle of a major correction (so you end up buying something that goes down more).  But for long-term investments, it should be fairly sound. 2 + 20 isn't really a investment style, more of a management style.  As CTA I don't have specific experience in the Hedge Fund industry but they are similar.   For tech stuff, you may want to check out Interactive Brokers.   As for legal stuff, with a CTA you need to have power of attorney form, disclosure documents, risk documents, fees, performance, etc. You basically want to cover your butt and make sure clients understand everything.   For regulatory compliance and rules, you would have to consult your apporiate regulatory body. For a CTA its the NFA/CFTC. You should look at getting licensed to provide crediabilty. For a CTA it would be the series 3 license at the very least and I can provide you with a resource for study guides and practice test taking for ALL licenses.   I can provide a brief step by step guide later on. "One topic that I've been trying to learn more about is the affects of the low interest rates on businesses and the economy from quantitative easing. Due to the amount of ""free money"" corporations have received over the last 5 years there has been a few interesting consequences. There are several corporations that have borrowed money at little to no interest with the feds intentions of seeing it go back into the economy however instead corporations have used it to buy back stock which was not necessarily the plan in the first place. You could definitely have a unique thesis written about something within that flow of funds. If that makes no sense apologies stupid undergrad here." "The raw question is as follows:  ""You will be recommending a purposed portfolio to an investment committee (my class). The committee runs a foundation that has an asset base of $4,000,000. The foundations' dual mandates are to (a) preserve capital and (b) to fund $200,000 worth of scholarships. The foundation has a third objective, which is to grow its asset base over time.""   The rest of the assignment lays out the format and headings for the sections of the presentation.  Thanks, by the way - it's an 8 week accelerated course and I've been out sick for two weeks. I've been trying to teach myself this stuff, including the excel calculations for the past few weeks." Technically a hedge fund is nothing more than a private investment partnership.  I was my own full time employee, with investment partners.  I traded for years, and own(ed) another business which was already more than paying all my bills, so why not start a hedge fund, doing something else I loved to generate additional income, and hopefully, someday, make it to the big leagues? "Assuming this is real, the Q's (QQQ) is an ETF that tracks the Nasdaq-100. It would be the approximate equivalent of saying ""Just put your money in SPY"" or any other ETF.  I didn't see the thread in question (looks like it was in /r/personalfinance not /r/finance; so, not the ""rules"" here), but my guess is people down voted you (and you were eventually removed by the mod) for ""low effort"", which simply stating ""Put your money in an ETF"" could possibly be construed as.  That said, the top rated comment in that thread *did* suggest putting some portion of the funds in an ETF, it's just rarely an appropriate answer for *all* of someone's investment capital." "Thanks for the info, things are starting to make more sense now. For some reason I've always neglected learning about investments, now that Im in a position to invest (and am still fairly young) I'm motivated to start learning.   As for help with TD Ameritrade, I was looking into Index Funds (as another commenter mentioned that I should) on their site and am a little overwhelmed with the options. First, I'm looking at Mutual Funds, going to symbol lookup and using type = ""indeces"". I'm assuming that's the same thing as an ""Index Fund"" but since the language is slightly different I'm not 100% sure. However, at that point I need some kind of search for a symbol in order to see any results (makes sense, but I dont know where to start looking for ""good"" index funds).    So my first question is: If I FIND a good mutual fund, is it correct to simply go to ""Buy Mutual Funds"" and find it from there? and if so, my second question is: How do I find a good mutual fund?   My goal is to have my money in something that will likely grow faster than a savings account. I don't mind a little volatility, I can afford to lose my investment, I'd plan on leaving my money in the fund for a several years at least.   My last question is: When investing in these types of funds (or please point me in another direction if you think Index Funds aren't the place for me to start) should I be reinvesting in the funds, or having them pay out dividends? I would assume that reinvesting is the smart choice, but I can imagine situations that might change that in order to mitigate risk...and as I've said a few times in this thread including the title, I'm a complete amateur so my assumptions aren't necessarily worth that much.   Thanks for the help, I really appreciate all the info so far." "I'd argue the two words ought to (in that I see this as a helpful distinction) describe different activities:   ""Investing"":  spending one's money in order to own something of value.  This could be equipment (widgets, as you wrote), shares in a company, antiques, land, etc.  It is fundamentally an act of buying. ""Speculating"":  a mental process in which one attempts to ascertain the future value of some good.  Speculation is fundamentally an act of attempted predicting.   Under this set of definitions, one can invest without speculating (CDs...no need for prediction) and speculate without investing (virtual investing).  In reality, though, the two often go together.  The sorts of investments you describe are speculative, that is, they are done with some prediction in mind of future value.   The degree of ""speculativeness"", then, has to be related to the nature of the attempted predictions.  I've often seen that people say that the ""most speculative"" investments (in my use above, those in which the attempted prediction is most chaotic) have these sorts of properties: And there are probably other ideas that can be included. Corrections/clarifications welcome! P.S. It occurs to me that, actually, maybe High Frequency Trading isn't speculative at all, in that those with the fastest computers and closest to Wall Street can actually guarantee many small returns per hour due to the nature of how it works.  I don't know enough about the mechanics of it to be sure, though." Mutual Funds are relatively evaluated and this is likely what you want.  Your answer is likely the information ratio.  If your interested, Active Portfolio Management by Grinold, Kahn is probably a good book to read.  That  being said, hedge funds will generally have absolute mandates and will be more likely to use a sharpe ratio. All of this makes perfect sense and I can definitely see the logic behind it.  But I don't think Hedge Funds are the way to go. The real money lies in real estate, more specifically land-banking. The problem, though, is that a lot of land-banking investments are really just scams and it's really hard to tell which ones are real and which ones are fake. "One alternative to bogleheadism is the permanent portfolio concept (do NOT buy the mutual fund behind this idea as you can easily obtain access to a low cost money market fund, stock index fund, and bond fund and significantly reduce the overall cost).  It doesn't have the huge booms that stock plans do, but it also doesn't have the crushing blows either.  One thing some advisers mention is success is more about what you can stick to than what ""traditionally"" makes sense, as you may not be able to stick to what traditionally makes sense (all people differ). This is an excellent pro and con critique of the permanent portfolio (read the whole thing) that does highlight some of the concerns with it, especially the big one: how well will it do in a world of high interest rates?  Assuming we ever see a world of high interest rates, it may not provide a great return. The authors make the assumption that interest rates will be rising in the future, thus the permanent portfolio is riskier than a traditional 60/40.  As we're seeing in Europe, I think we're headed for a world of negative interest rates - something in the past most advisers have thought was very unlikely.  I don't know if we'll see interest rates above 6% in my lifetime and if I live as long as my father, that's a good 60+ years ahead. (I realize people will think this is crazy to write, but consider that people are willing to pay governments money to hold their cash - that's how crazy our world is and I don't see this changing.)" "As other people have posted starting with ""fictional money"" is the best way to test a strategy, learn about the platform you are using, etc. That being said I would about how Fundamental Analysis works . Fundamental Analysis is the very basis of learning about an assets true value is priced. However in my humble opinion, I personally just stick with Index funds. In layman's terms Index Funds are essentially computer programs that buy or sell the underlying assets based on the Index they are associated with in the portion of the underlying index. Therefore you will usually be doing as good or as bad as the market. I personally have the background, education, and skillsets to build very complex models to do fundamental analysis but even I invest primarily in index funds because a well made and well researched stock model could take 8 hours or more and Modern Portfolio Theory would suggest that most investors will inevitably have a regression to the mean and have gains equal to the market rate or return over time. Which is what an index fund already does but without the hours of work and transaction cost." Man who made fortune as hedge fund, active investor decries passive investment. Shocker. Even if passive investment was a bad thing, which I don't think it is, wouldn't it result in a less efficient allocation of capital, allowing for more opportunities for active investors? Keep in mind that it's a cliche statement used as non-controversial filler in articles, not some universal truth. When you were young, did you mom tell you to eat your vegetables because children are starving in Ethiopia? This is the personal finance article equivalent of that. Generally speaking, the statement as an air of truth about it. If you're living hand to mouth, you probably shouldn't be thinking about the stock market. If you're a typical middle class individual investor, you probably shouldn't be messing around with very speculative investments. That said, be careful about looking for some deeper meaning that just isn't there. If the secret of investment success is hidden in that statement, I have a bridge to sell you that has a great view of Brooklyn. The Khan Academy has a huge series on finance (Sal Khan used to work at a hedge fund before he started his magnum opus): http://www.khanacademy.org/#core-finance  Some are pretty basic stuff, but he does have some interesting commentary and snippets of more interesting topics. They're all very low-commitment and bite-sized.