Q: Which hedge fund has a $5,000 minimum?
P.W., via e-mail
A: Morningstar Inc., the Chicago mutual-fund tracker, identifies about a dozen funds that are open to investors with $5,000 or less. Phoenix Market Neutral Fund A requires only $500 to get started. Others include Franklin U.S. Long Short and Hussman Strategic Growth, both at $1,000 for a minimum initial purchase. And J.P. Morgan Market Neutral A fund requires an investment of at least $2,500.
Paul Deming, a senior technical analyst in Minneapolis with the Windsor Alternative Fund 1, is a great believer in hedge funds because, he says, "the whole point of money management is to select a diversified set of investments that come together to offer the potential for attractive returns with some degree of consistency and predictability."
Hedge funds can help accomplish that goal as they short stocks (bet that an investment will fall), buy derivatives, engage in arbitrage, and otherwise put money to work in ways that mutual funds don't.
But hedge funds also differ from mutual funds in that they don't have the same regulatory or reporting requirements about their pricing or liquidity, so there's reason to be careful.
In fact, until very recently hedge funds were like polo - a game for the very wealthy who had to sign waivers, as it were, to show they understood the dangers and could withstand any losses.
Hedge funds are now available to the non-jet-setters But because of their complexity, Mr. Deming suggests that you work through a broker or other qualified financial expert before making a selection.
For some heavy reading on the topic, visit www.hedgeworld.com. Or call the company at 914-921-7800 for some of its guides to hedging.
Q: My wife and I are both in our late 60s and retired. Where can I find online both current information about the economy and some dependable professional advice on how to decide when to change a mutual fund from money market to something such as an index fund for increased return?
R.H.B., via e-mail
A: For current economic and other related information, Wendy Spencer, a certified financial planner in Denver, suggests you try these two sites: the Motley Fool at www.fool.com, or CNN's site at money.cnn.com.
But for truly personalized advice, Ms. Spencer says you may have to forgo the Internet for an old-fashioned talk with a real person. After all, she says, the Internet has been designed with mass markets in mind. Finding a website that provides "dependable professional advice," and that has both the knowledge of your specific financial situation and the legal ability to dish out such counsel is a pretty tall order.
Short of that, Spencer warns that information received via the Internet should be taken with a grain of salt - double-check all information.