Mutual Funds: Hedge Funds

Steve Martin used to tell a joke about the simple steps you need to take to become a millionaire. After pumping up the crowd in Tony Robbins fashion -- asking "Are you ready?" -- he'd rattle off his first step: "Okay, first you get a million dollars."

His answer also provides the first step needed to have access to the tony, exclusive world of hedge funds. Hedge funds are private investment partnerships for institutions and wealthy individual investors that, unlike mutual funds, are largely unregulated by securities industry cops. This doesn't mean they can break the laws, it just means that they can engage in lots of legal but risky investing strategies.

But, before the nonmillionaires tune out, take heart and read on: As we'll see, more and more firms are offering funds with hedge-like characteristics for the masses. But a warning for both rich and poor alike: Hedge funds often tread into very risky waters. ...