If you are used to managing a considerable amount of wealth, you have probably heard of an investment mantra that you have learned to accept without question: looking to index funds as a way to carry you forward financially, is about the same as getting somewhere depending on finding someone to hitch a ride with.You will probably make it where you're getting, but there is bound to be a certain amount of hassle, and sometimes you may get stranded. If you are able, you are much better off getting a personal jet, or its investment equivalent, great hedge funds, private equity, and property. Actually, this is one of those times that traditional wisdom steers us wrong.
The problem with the way we invest is, if we have access to limited means in life, we don't save enough, or in any regular way; and if we have access to considerable wealth, we are too caught up in chasing after the cleverest and most impressive investment possibilities out there, that we forget about investing in any regular way. Index funds may not really set in well with these flashy investment plans, but economists and experienced financial planners have always, quietly, advocated that people turn to slow, plodding, but completely reliable investment plans withavenues like index funds. The wealthy would never have to spend their years biting their nails, watching the stock report crawl never knowing if they are going to be coming out on top, or be scraping the barrel. There'll be no roller coaster ride that takes them to the heights of profit and the depths of loss three times a year; and certainly, there will be no high-priced investment advisor on their case. All they have to do is use index funds to spread their money evenly across different kinds of assets, and they should be fine. For most people, wealthy or modest, their returns from the roller coaster investment policy should actually average out the something quite close to what the plain lazy river would give them. At not a tenth the risk.
In fact, regular people without a $3 million stock portfolio would do well to go by this rule too. Even mutual funds if you would follow their performance over 10 or 20 years, rarely end up beating the stock market. But of course, the investment gurus who manage your money for a fee, have a different opinion. Their theory goes, that while finding a top performing stock isn't something that happens every day, when it does happen, it could take you farther in a month than index funds would, in years.
There are two basic problems with high-priced hedge funds and the like that the wealthy should be aware of. There are very rarely any that are profitable over the long run. Some might be good for a short time, not much longer. And also, the good hedge funds usually are full before you can opt in. But the big kicker here is the way hedge fund managers will charge you fees that are nothing short of staggering, that will eat into your wealth. And even hedge fund managers agree that their fees usually, take something away from how profitable things turn out to be for you. Much better would be, just indexing over a wide range of great investments, and giving alternative investments the pass. If you happen to be properly entrenched in the emerging markets, there is no reason you should need commodities funds either. It just so happens that all the best resources available, are already indexed. You might as well give up looking elsewhere.