What are Hedge Funds, Mutual Funds, and Index Funds?

A hedge fund is a private fund available only to high-net-worth investors; the managers have complete flexibility to bet on both market directions, up or down.

They charge hefty management fees, typically 2%, and share in the profits typically 20% of the profits go to the manager.

A mutual fund is a public fund available to anyone. In most cases, they are actively managed by the team that assembles a portfolio of stocks, bonds, or other assets and continually trades the holdings in hopes of beating the market. An index fund is also a public fund but requires no active managers.

The fund is simply owning all the stocks in the index; for example, there would be all 500 stocks in the S&P

500 index.

What is a market correction?

When any market falls by at least 10% from its peak, it’s called a correction, a peculiar blend and neutral term for an experience that most people relish about as much as dental surgery exhalation mark when a market force Batley 20% from its peak is called a bear market.

Bear markets from the 1940s until 2009

  • 1946 until 1947, a bear market lasted 353 days with a decline of -23.2% in the S&P 500 index
  • 1956 until 1957 564 days and in a declining of -19.4% of the S&P 500 index
  • 1961 until 1962, 195 days and a decline of -27.1% of the S&P 500 index
  • 1966 children for today’s decline and a -25.2% of the S&P 500 index
  • 1968 to 1970, 543 days decline and a -35.9% of the S&P 500 index
  • 1973 to 1974 694 days decline of -45.1% of the S&P 500 index
  • 1987 101 days of the decline of -33.5% of the S&P 500 index
  • 2007 to 2009, 515 days of decline and a drop of -57.6% in the S&P 500 index

Do not be afraid and make wise decisions based on facts, not feelings

Anybody who reads this blog strongly advises before investing and putting your money in the stock market before you start your journey; I strongly recommend that you read up on the stock market and learn how to invest when it comes to your income.

I would advise spending between 10% to 20% of your income on investments in the stock market. But before you start this process, it requires self-education or professional education. Both methods are viable.

This is important because we must be careful where we place our cash. Investing in the stock market is a great way to have a successful retirement plan but can also be used to make an independent living.

To begin your financial independence journey, I recommend investing in the S&P 500 index because I would never recommend or suggest novices and beginners invest in anything other than indexes.

For example, Warren Buffett, a veteran of the stock market, invested his money in index funds to support his family after his death because they are a safer alternative than mutual funds.

I hope that anyone reading this takes the advice to heart that in the beginning, index funds are the safest place to go.

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