Reading the Financial Pages for Dummies®

Chapter 15. Discovering Hedge Funds, Bonds, and ETFs

In This Chapter

• Understanding the mysteries of hedge funds

• Getting to grips with guaranteed income bonds

• Engaging with Exchange-Traded Funds

I was never noted for my prowess at science. In fact, I was thrown out of the lab at school for fighting with my best friend in class, because it seemed more fun than learning my atomic numbers. I'm reliably informed, however, that atomic scientists have spent a lot of their time scratching their heads over a strange type of atomic particle known as a Higgs boson, which is now the subject of a $9 billion experiment at the CERN laboratories in Lucerne. All of which is an act of faith, really, considering that the only way the scientists know these invisible atomic particles exist at all is that they can observe the effect they have on the things around them. Other particles dodge and swerve and do unexpected things whenever the Higgs bosons are in town. And, in a strange way, hedge funds bear a certain resemblance to these mysterious particles. Bear with me, it'll all become clear.

Investors might think they know what hedge funds are up to, most of the time, but they can never be completely sure. That's because hedge funds are secretive organisations that don't reveal what they're doing – and indeed, they often go to enormous lengths to cover their tracks. What I can say for certain, though, is that the role hedge funds play in the financial markets is simply enormous, and becoming more so with ...