Cocktail Economics: Discovering Investment Truths from Everyday Conversations

Chapter 16. Alpha Bets: The Case for Hedge Funds and a Greek Letter You’ll Want in Your Portfolio

There are fees, and then there are fees. As one ascends the active ladder, the promise of expected return can rise precipitously, but so can the cost of entry.

Let’s look ahead several years, imagining that you diligently followed the rules of a cyclical-based asset-allocation strategy and could boast a portfolio net worth of $1 million or more. Or let’s say that today you have seven figures or so to put in the stock market and are interested in achieving the biggest bang for your investment buck. In either case, you would have access to the upper rungs of the investment ladder, several steps above the index fund and the almost equally accessible mutual ...