At this stage of my personal finances, I am edging ever closer to to becoming an accredited investor. But as of now, I am not there yet. Accreditation can allow a person to qualify for hedge funds but evidence of hedge funds outperforming the market are hard to find because many hedge fund managers simply do not wish to report their results to a central database.

It is probably easier to expect that investors of hedge funds would generally underperform the market because the fees are so high. Hedge funds can charge a management fee of 2% and 20% of their outperformance compared to a benchmark. Furthermore, the book mentions that hedge funds tend to have returns which have a large kurtosis and are negatively skewed. This is geek-speak for returns which can be very large and negative when the time is not right.

Thus, it may be safer for …