The main goal of an investment is to have a good return on investment (ROI) while minimizing the risks as much as possible. There are many investment options in the market today, including hedge funds, private equity, index funds, venture capitals, ETFs, and real estates among others. Cryptocurrency assets have joined the list of investment vehicles, giving investors opportunity to earn good ROI. In this article, we discuss the various investment vehicles that are common in the market, comparing them against each other.
Hedge Funds vs. Private Equity
Hedge funds are privately owned entities that seek investment funds from investors that they invest back into financial instruments. Hedge funds are simply a form of investment partnership, which helps investors protect one another from potential losses in an economic downturn. Hedge funds portfolio structure is quite complicated and is formed as a limited liability company to safeguard the investors and the managers from individual responsibility in case the company gets bankrupted. Hedge funds use several strategies to earn investors high returns, including investing in financial instruments that are quite risky for high returns.
Private equity, on the other hand, can be defined as the funds that are pooled from investors and used to acquire equity ownership of a company. Private equity investors are comprised of institutional investors and accredited high net worth investors who can commit large sums of money for the long term.
Hedge Fund vs. Index Fund
As we have discussed hedge funds, another investment vehicle is index funds. This is a portfolio-based investment product that tracks market metrics to minimize risks. For example, they follow the S&P 500 or specific industry as a whole to ensure they minimize the risks involved. This is different from hedge funds that tend to maximize profits by taking high-risk positions and making investments to mitigate those risks.
Hedge Fund vs. Venture Capital
The difference between hedge funds and venture capital is primarily in how they operate and their goal. As earlier stated, hedge funds have the potential to produce a higher return on investment. Venture capital funds, on the other hand, are funds pooled from investors to invest in start-ups. Venture capital funds often support businesses that show potential to grow into big businesses.
Hedge Fund vs. ETF
EFTs, which is the short form for Exchange Traded Fund, is a type of security used to track an index, bond, commodity, or a basket of assets. ETFs are listed and traded on a securities exchange, tracking the returns of financial instruments that it monitors. Investing in ETF means you putting your money into a predetermined index market securities. ETFs are ideal for persons looking to invest in more liquid and cost-effective investment options. They include industry ETFs, currency ETFs, commodity ETFs, and Inverse ETFs.
Invest in Crypto Assets
An emerging investment vehicle is crypto assets, which are growing in popularity every day. Cryptocurrencies have given investors hope against inflation, as they tend to be resistant to inflation. Investing in cryptocurrencies means buying crypto-assets such as Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Dogecoin (DOGE), etc. Firms such as Helios Fund will lock your Bitcoin for 3 years and pay you 9X your investment. They manage this feat by actively managing their portfolios and optimize BTC based on the best market conditions. What’s more, they help you hedge against crypto volatility, hence you’re not affected by cryptocurrency volatility.