The risk in hedge funds

Although there are always risks in investing today operating funds that are fully guaranteed. However the funds more "risky" are expected to have higher performance. For example, funds that have invested in Mexican stocks have gained in recent years a great annualized return, but the risk of investing in a fund of these is different than investing in a fund that offers you 3%. Higher returns mean higher risk.

Finding the right mix of risk / return depends on each investor, which depends on many things, such as age, wealth, marital status, lifestyle and risk aversion among other things. The most important thing that must be set when making the investment plan is to determine who wants the money, the goal of saving and know the instruments, the risk and expected return of each.

Before investing in a mutual fund, check your rating. This rating consists of two parts, one part Alphabetical indicating the quality of the fund and its administration.

The quality of the fund has six levels ranging from outstanding quality levels (AAA) to low Quality (B). In a debt fund for example, the level of quality determines the ability to pay the entity providing. When buying government debt, AAA quality is usually because the government plays in their payments. When purchasing corporate debt, the quality depends on the degree of indebtedness of the company, its sales pipeline, its board, and so on.

The range from maximum to minimum level is AAA (outstanding), AA, A, BBB, BB and B (Low).

The second part of qualifying for an investment fund is numerical, ranging from 1 to 7. This digit indicates that both affected the performance of the fund by the global economic environment. A fund's sensitivity to changing market conditions is:

1 = Extremely low
2 = Low
3 = Low to moderate
4 = Moderate
5 = Moderate to high
6 = High
7 = Very high.

This scale can differentiate and compare the market risk of the various funds.