Want to Try Hedge Funds? First, Get Rich

How do the rich get richer? Here's one way: They invest in hedge funds.

You don't hear too much about hedge funds if you're not an "accredited" investor or "qualified purchaser" with millions in investment assets. But there certainly are a lot of investors who fall into that category and are willing to pay significant fees to get into a hedge fund.

According to industry source Barclay Group, hedge-fund assets have grown from $323 billion in 2000 to more than $1.8 trillion last year. And the number of hedge funds has leapt during the last seven years, from around 550 to more than 13,000.

Hedge funds use varying strategies in their efforts to outperform market benchmarks such as the S&P 500 stock index. Some take "short" positions to offset their ownership of stocks. Others use futures and options to hedge their outright stock purchases. ...