Narrative drives most of economics. Everything seems to be part of a story, and how that story is told often leads to critical error.
From Barry Ritholtz
Markets are frequently ahead of, and often out of sync with, the economy.
It is in your DNA to love a good story. You know, neat tales with heroes and villains and conflicts to resolve. A good story pushes our buttons, is exciting and memorable.
You have a natural tendency to want an emotionally satisfying tale - and to make investments based on that - despite times when the actual data may be telling you something different.
The simple reality of life is that everyone is wrong on a regular basis. By confronting these inevitable errors, you allow yourself to make corrections before it is too late.
Despite all the media coverage, glitz and glam of hedge funds, they have not done well for their investors. They have high - some say excessively high - fees; their short- and long-term performance has been poor.
Hedge funds are not especially liquid. Many are 'gated' - meaning there are only small windows when you can withdraw your money. They typically have a high minimum investment and often require investors keep their money in the fund for at least one year.
Investors tend to discover 'hot' mutual fund managers just after a successful run and just before the inescapable force of mean reversion is about to kick in.
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