Bad Credit Real Estate Investing: Stop Dodging The Bullet & Clean The Gun

If I had a dollar for every email I was sent, message board post I have read, or telephone call I have received asking how to invest with bad credit, I would have retired 10 years ago. If most of these individuals would learn some age old truths, it would make their investing lives so much more productive.

The truth of the matter is, there are ways for a wannabe investor to begin investing with bad credit. There is wholesaling, flipping, subject to investing and a host of other guru related theories and techniques. The ultimate thing that will happen though, at one point or another, is that they will run into a wall where credit will be needed. If they really want to take their investing to the next level, they need to be the ones financing the properties and realizing the nice gains. Are there mortgage companies that will lend to poor credit clients? Sure, as an owner occupant. Try getting a 90-100% ltv loan for an investor property with a poor credit score...It just ain't gonna happen kids! Ah yes, but some wise person will point out that they indeed do have a program that will do this. Great! So, what is the interest rate and how many points are rolled into this and can I hear what the closing costs will be? Exactly my point. These loans, if they do exist, would be so expensive, that most all deals would not work using them.

Why not take a proactive approach and get yourself cleaned up “creditwise” before you attempt to do any investing? Yep, it can be done and yep, it will take some time, but it will make a huge difference in your financial future. By cleaning up your credit first, you will have the time necessary to gain the knowledge and direction that you want to head once you are ready to begin. It will open up a world of opportunities that are now closed off to you due to your credit. Once you make the intelligent decision to restore your credit first, you must then take a closer look at how you should accomplish this.

Let's step back and take a look at the big picture for a minute. Forget all the hype that you hear, both positive and negative, and let's face the facts. There are ways to clean your credit. 90% or more of all credit files have errors and these errors are NOT in your favor. There are also old debts that should drop off due to statue of limitations as far as how long something can be on a report. There are people that had filed a bankruptcy and all of the negative items were not included, there are things listed twice, collection companies that are no longer in business and will not verify the debt. The list goes on and on. The bottom line here is that you need to either learn how to get things removed off of your credit files yourself, or have a competent company that follows the law to the letter, do it for you. Do note that if you are going to do it for yourself, it is much more than sending in letters and waiting for items to magically drop off. You will want to arm yourself with knowledge of the laws: The Fair and Accurate Credit Transaction Act of 2003, Fair Credit Reporting Act, removal via section 609, the HIPAA and the Fair Debt Collections Practice Act. You will also want to be knowledgeable of what it means to validate a debt, as this is much more than a creditor verifying that they have a debt on record. Validation makes them prove the fact that a debt is owed (used properly, this technique can remove a great deal of items not known to be your debts).

For those individuals that opt to have their credit cleaned by an outside agency, there are a few things that you should consider. Contact the companies and actually interview them. Before you actually begin the questions, see if they are hiding behind the net. Ask them: Will they review your credit reports for free, BEFORE you sign up with them or pay them any money? If they say yes, go on with the following questions:

Do they only send dispute letters to the three credit reporting agencies, or will they dispute directly with creditor, collections agencies and courthouses if necessary? If so, is this at no extra charge?

If they charge a continuous monthly fee, what is their incentive to repair your credit quickly?

How many accounts will they work on at one time?

If you are going to hire a Law Firm, will they be representing you or sending the letters on your behalf?

Do you have to fill out your own disputes on-line?

Do they offer a TRUE 100% money back guarantee?

Do you have 24 hour, 7 day a week access to your account?

Remember...Do not EVER let a credit repair company pull your credit reports for "free"! They do not have a permissible purpose and it will count as an inquiry against you. It will actually LOWER your credit score.

You will be amazed at the amount of so-called professional companies and firms that will fail these questions miserably. Do not give up though. Once you find a company that answers these questions correctly, then guage your comfort level when speaking with them. You will be conversing with them for the next few months, so make sure it's a good fit. You will also want to feel that the company you choose truly has their clients needs as the #1 priority.

Finally, you should remember one main point. There is NO MAGIC BULLET that will clean your credit report overnight. Ask yourself this question: How long have you had bad credit? I would imagine that it has been a year or so if it has been a day. Wouldn't it be crazy to think that it can be erased overnight? It will take some time (3-6 months generally), but it is worth it when done correctly.

Make the right decision, learn a little patience, and get your credit restored before you attempt to enter the real estate game. Take the time to learn what it is you want to gain out of this amazing field, and do it the proper way.

Power Up Your Performance! 6 Sure-fire Strategies

"Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don't quit." Conrad Hilton

1. Get rid of clutter. Too much "stuff" in your office and inside your home clutters your mind, creates confusion and exacerbates stress. Start by cleaning only one area at a time. What items do you have that either need to be donated, sold, or put back where they belong? As you're cleaning and putting things away, say to yourself, "Everything has a place." This is a phrase I often heard by my dad while we cleaned house and it still rings in my ears every time I clean.

What clothes do you have that you haven't worn in a year? Where by some miracle you're hoping to fit into them again? Donate these items to a local charity. What piles of paperwork are lying around that need to be filed? Studies show that 85% of everything that gets filed away never gets looked at again. If this is the case, consider starting an archives file. You'll feel more energized, less stressed and more self-confident when you eliminate clutter.

2. What's going on outside you is a result of what's going on inside you. What self-limiting beliefs do you have about your skills, aptitudes and abilities? Be honest with yourself and write them down. You don't have to share them with anybody. The average person has 50,000 to 60,000 thoughts a day. When we talk to ourselves about ourselves, much of that self-talk is negative. As the saying goes, "How many times in a day do we ‘should' all over ourselves with everything that we should be doing?!" Get rid of the "shoulds." Become more aware of your thoughts, change them into positives, and you'll start achieving more success.

3. Enroll in a sunrise semester. Spend 30 to 60 minutes a day first thing in the morning reading motivational, inspirational or other pertinent information related to your chosen field. Your subconscious mind is most amenable to suggestion FIRST hour upon arising, and that LAST hour before bedtime. As John Wooden once said, "If I am through learning I am through." Stay current and constantly upgrade your skills.

Learn more to earn more and to improve performance. Much of this is stuff we already know. Yet, often we need to hear it again because we don't "do" with what we know. Invest at least 3% of your income in personal and professional books, CD's, e-books and teleseminars. If you're pressed for time listen to CD's in your car on your way to work, picking up the kids, or driving to and from the supermarket. Attend seminars and conferences no matter what the distance. It is worth the investment in keeping you motivated.

4. Become more self-disciplined. The difference between successful people and unsuccessful people is that successful people make themselves do things unsuccessful people don't want to do. It's that simple. Once you start an important task, discipline yourself to keep going. Focus on it single-mindedly until it's complete.

Be more aware of your every day habits and what distracts you. Make a list of the activities you engage in that are a waste of time. Resolve to eliminate them altogether or delegate them to someone else. Start by determining which activities only you can do. These are the ones you must do. Outsource everything else. The ability to determine where you should spend the majority of your time and then complete those tasks can have more impact on achieving your goals than anything else.

5. To improve performance and productivity work faster. Compete with yourself. Make it a game. Resolve to work more effectively and efficiently throughout your work day. Try arriving to work earlier and leaving a little later. Many business people in my speaking engagements tell me they get so much work accomplished when they arrive to work at the crack of dawn. No one else is in the office and there aren't distractions. Try this at lunch as well. Everyone leaves from noon to one in the afternoon. Cut back on frivolous time wasters such as talking with co-workers around the water cooler and other idle chit chat. This will free up your time for the things you really enjoy, like spending time with your true friends, family and loved ones.

6. Review your values and priorities and make sure your goals are consistent with what's important to you. Otherwise, no matter how much you think you want something, you won't work hard to achieve it if it's not in line with your core values. Write down each individual goal you think you want. Is it consistent with giving you greater peace of mind and happiness?

For example, values that are important to me in terms of work are helping others, freedom, creativity and flexible hours. A corporate job where I'd sit in an office all day would make me unhappy no matter how much it paid. So start by clarifying your values.

Success means many things to different people. In powering up your performance for greater success, first determine what you really want…and why. For example, do you really want a new car out of necessity, or is it to compete with the neighbors next door? No matter how much effort you put into achieving your goals, if they don't fit in with what's really important to you, you'll find ways to procrastinate or sabotage. It's easier to be self-disciplined when you're passionate about something and it fits in with your core values.

The Secret to Negotiating with Creditors like A Pro

So many businesses these days are saddled by overburden some debt, and when debts go unpaid negotiation with creditors becomes a necessary tool for a debt-laden business to survive. Whether you do it on your own or hire a professional, skilled debt negotiators save businesses real money. However, some business debt negotiation succeeds and some fails. Why?

The secret to succeeding in business debt negotiation is in understanding how to best position a debt-troubled company to negotiate a fair-minded settlement with creditors. The use of proper positioning will impress creditors and promote reasonable settlements. Failure to position a company properly will put it at a significant disadvantage with creditors, dooming it to a negotiating “rut”.

In positioning a debt-troubled company, the primary types of variables that are relevant for effective debt negotiation with creditors are economic, credibility, legal, and collection history. Understanding how to use these variables correctly allows a company in serious debt to create a strategy to win the debtor/creditor “negotiation game”. Sound interesting? Read about the variables below.

Economic Variables. Economic variables consist of effective communication and documentation with creditors regarding current cash flow, future earnings potential, assets, guarantees, outstanding business debt loans, security on any debts, liens, judgments, etc. A good negotiator needs to consider that some creditors are in deep need of their money, while others have deeper financial reserves. Proper use of the economic variables results in an informed and interested creditor who is most receptive to communications and offers. Negotiators also need to be prompt and honest. Negotiators who are not knowledgeable about the details of the business they are negotiating for are lost!

Credibility Variables. Having clear goals and adequate resources to settle debts are instrumental. But the best laid plan will be useless without creditor cooperation. This takes a credible negotiator. Open communication with creditors has to be correctly managed by negotiators. High quality information, current information, and frequent communications need to be exchanged and maintained in order to reach equitable debt settlements. Broken promises in the past, lack of clear goals or a clear reorganization plan, unanswered inquiries, etc. damage credibility and slow the process. Negotiators need to maintain creditor respect, and reestablish the credibility that has been lost by the debtor.

Legal Variables. Every creditor and collector has a wide range of legal options in trying to collect their money--everything from doing nothing to winning a judgment and seizing assets. A good negotiator knows each creditor’s exact position in the collection process. Negotiators know that creditors will be considering, among other things, whether or not the debt is in suit, if the debt is disputed, if the debt is secured, if bankruptcy has been filed or contemplated, if they are the original owner of the debt, the collectability of the debt, etc. Negotiators should always factor in the costs of legal action in their analysis.

Collection History Variables. The history of a debt account is important to the creditor's collection stance. Variables such as prior collection efforts, the number of prior collectors, the age of the debt, prior offers and demands, etc. help creditors decide how to proceed. Some collectors have set rules provided by creditors for collection, while others have more internal flexibility to fashion settlements and solutions. As a negotiator, try to gather information about the creditor’s limits, payout terms, willingness to settle, etc., while maximizing the use of the collection history data to turn the creditor towards a reasonable solution.

The above list of variables is not meant to be complete, and there are secondary variables (the discussion of which is beyond the scope of this article) that can come into play during negotiations.

The negotiator’s strategy is to use the above variables as a “system” to provide creditors with lots of accurate information about the business’ problems, so that the creditor will be most informed of how dire the cash flow is, how burdensome the debt load is, how repayment cannot be made, how operating expenses are not being met, etc. Typically, there will be two outcomes. Creditors will either agree to settle debts for less than is owed, or they will agree to extend the time in which they are paid. Either way, an efficient debt negotiator will allow a business to allocate more resources towards increasing revenue, as opposed to wasting resources on debt load it cannot pay.

Which option a creditor decides to take is dependent on each particular debt and each particular creditor. There is no steadfast rule as to what a creditor will do. Some debts are just recently delinquent, while others have been through litigation and have judgments entered. Some debts are unsecured, while others have an asset pledged against them in case of default. Some creditors are in deep need of the money, while others have deeper financial reserves. Good debt negotiators will balance creditor “wants” with debtor “needs”.

Mastering the debt negotiation process begins with understanding the "ins and outs" of these factors. Using the strategy mentioned above will certainly influence a creditor’s decision-making process, potentially saving a lot of money for debt-strapped businesses.

Team Building Lessons from the Modern Cave Man - Part 1

In the beginning…

The caveman needed to survive. Man found safety in groups. It was not a matter of preference, it was a matter of necessity. If you were not a part of a group, your chances for survival were slim. Conformity to the majority became necessary to stay in a group and physical strength was the dominant factor for group leadership. Those who were strong and successful in the art of survival had the majority influence toward that conformity and only the strong challenged these leaders. If you challenged the leadership, you needed to be prepared to fight. And, if you lost, you were forced to leave the safety of the group and fend for yourself. The risk was great so there were few challengers and it became an ingrained survival response to gain acceptance from the group, so people just kept quiet.

It was a time of compliance!

…Then came the significance revolution

The caveman's brains got bigger and more developed. Individuals became torn between finding there own path and gaining there own recognition, verses conforming to the group. Physical strength was no longer the dominant factor for influence. Now, people could think! Survival was no longer the acquisition of food and shelter; it had become a fight of ability. The more intelligent you were (and able to apply it), the more valuable you had become. The more influence you could exert over others, the more powerful you became. We began to compete for significance trying to show others how important and able we are, and if they believed us, or in some cases feared us, we became even more important.

We created a civilization that needed to be right!

Then came the industrial revolution…

…and groups evolved into teams but the fundamentals of our survival instinct, our emotional evolution and the emotions that drive us were still there, and a major part of our psychology. Our ability to work at our peak in teams depended on the way these emotional drivers and understanding the dynamics they promote.

Today, the caveman has evolved and the awareness of our psychology has expanded.

We now seek better ways to improve our selves and our performance, but our caveman nature sometimes gets in the way. While our modern brain is influenced by numerous factors of emotional drive, the three that came from our caveman days are still central to our performance in teams:

The drive to belong The drive for security The drive to be significant

As with our caveman ancestors, our fear of loss is more important that our potential for gain. Loosing (or the potential of loosing) our sense of belonging or our sense of security or significance are materialize in caveman like reactions. These reactions are sometimes subtle.

Our caveman reaction for conformity is driven by our need belong and feel secure in the group, so we keep quiet and comply. And if we do challenge, we are probably depriving others of their significance or security, causing them to react to "protect" themselves. This can either escalate to greater conflict, or it may revert back to compliance and conformity to prevent conflict. Either way, these are still caveman reactions and are NOT useful to high performance teams.

The greatest obstacle to high performance is the caveman's reactions to loosing significance, in order for the caveman to be right, he must make someone else wrong, and that means, more caveman reactions from the other team members! And the worst part is that reality is not what matters, the caveman reacts on emotion without fact, and so "perception" influences reaction. When someone feels wrong, they feel less able; they may feel like they have less control and therefore are less secure, they react with aggression or submission out of dissatisfaction, and a lesser desire to cooperate affects their performance and the entire team.

So how do we get the caveman out of our teams so we can stop reacting and act like the evolved humans we have become, able to perform at the peak of our abilities?

There are 4 stages to our evolution into "awakened" team members

Each stage is a stage of awareness. It awakens our greater perception. But for it to be effective, the entire team has to take this journey. But there are consequences, once team members have awakened, they will never view teams again in the same way. They can never go back to the way it was and can never be satisfied with mediocrity. Each stage opens our eyes to the caveman within ourselves and others, and it lets us use the intelligent part of our brain to send this caveman back when he tries to invade our minds and body. Different team members may be at different stages in their evolution, where are you? These 4 stages are as follows:

Stage 1: Acknowledge the primitive caveman in you

Look at the behavior you have had in the past. How many times have you gone against your better judgment to "go with the flow"? Discover your need to belong to the group, to be accepted by your pears. How has this need manifested itself in your interaction with others? What has it prevented from achieving? Would your relationships Really be damaged if you expressed your views and opinions or confronted someone else's potentially bad decision, or is it possible you would gain more respect. As a leader, is it more important for you to be liked than to get the expected results?

By reflecting on the behaviors you have displayed in the past, and realizing the damage you are doing to your personal effectiveness and the effectiveness of those around you, you can see the primitive caveman for what he is. This is the first step in your evolution.

For the Second and Third stages, Please read Part 2

Team Building Lessons from the Modern Cave Man - Part 2

Stage 2: Soothing the significant caveman

Now the caveman in you has become more expressive. You tell people what you want and how it should be. The problem is they react to you. There are two types of reactions you receive:

1. If you speak out with little confidence and conviction, you have only evolved in actions and not in mindset. Others react to you with insignificance; they make you wrong or unimportant. They do not pay much attention to you and you will accomplish little. Your actions are the beginning but you must be consistent and find your conviction. Imagine the alternative if you do not… Extinction!

2. You have the conviction and the confidence and now need to show how great you are and how much better than everyone else your ideas and abilities are. Others react by rebelling, some rebel externally and create open conflict. Others rebel internally and while they quietly go along with what you say, they feel that you treat them with insignificance, that you make you wrong or unimportant. Here your ability to overcome fear of not being accepted has brought you to this stage, but now you must learn to apply it effectively.

You are at stage two because your significance is central to your being, you tend to react to others that "appear" to take it away from you. This creates confrontation and brings out the caveman in your other team members. Then they react back and just make a big mess! So before you can transcend to stage three, you must awaken to the reactions that YOU create. Knowing you weaknesses is the foundation to your evolution. FIRST though, you need to admit you are the cause of much of this reaction. IT'S NOT OTHER PEOPLES FAULT! Don't make others wrong so you can be important! You need to take full responsibility before anything can change. You can find other more productive ways to fill your need for significance.

Significance is about feeling important, so what if you had the power to make others feel important, the ability to bring out the best in them, their passion, and their motivation? Would you gain gratification from this power? Would you get significance from the better overall results that could be achieved?

Stage 3: Keeping the caveman away from your team

The caveman shows up when your modern (intelligent) brain shuts off. The more you can keep it on, the less time the caveman spends with your team.

Remember, when the caveman shows up, he brings out the caveman in the rest of your team members. And before you know it, you've got a group of cavemen either beating each other or hiding in the background. So STOP IT! The key to using the Intelligent part of your brain, is to map the areas that might cause reaction and tagging them with a "caveman alarm".

Write a list of issues that make you frustrated, angry, submissive, fearful, etc. Put this list in a place where you will often see it. There is a part of your brain that retains this knowledge in your subconscious, so when one of these issue comes up and you begin to react (using the primitive part of your brain), you remember the list and you remember that you may be letting the caveman out. At this time the intelligent part of your brain kicks in and allows you to work through the issue in an evolved manner.

Stage 4: Evolving into the awakened team member

By this stage you can stop the caveman from coming out in you. You have gone beyond your primitive emotional reactions to "fear of not being accepted" and "fear of not being important". You don't always need to be right, and you don't make others wrong. You don't avoid conflict because you're afraid others won't like you or your need to belong.

You have awaked to an evolved individual that can think and act without fear, an individual that gives value to the team instead exploiting them for your personal emotional gratification. You take action in place of reaction. You have cultivated the courage of an evolved individual.

But many of your team members often still react. At this stage, you understand them more, so you don't react to their reactions. You can use the intelligent part of your brain instead of the primitive reactive part. So how can you affect those around you that do react?

Look at the way you express yourself. Knowing that that caveman can appear in others instantaneously, how would you communicate when others react, what would you do or say to make the caveman in these team members go away?

Well first, you must identify what stage in evolution they're at. Knowing this gives you the understanding of what they fear. Do they fear losing their security and acceptance the team provides, or do they fear being unimportant, insignificant? This knowledge provides the platform for you to help them fill these emotional needs and put aside their fears.

Second, give them this article for disclosure of your intentions and awareness of what's happening. If you all have the same understanding, it becomes easier to achieve results as a team. And, as this Team centered article is based on the Directive Communication™ psychology, attending Directive Communication™ based workshops would accelerate the process.

Finally, use questions to fill there emotional needs of belonging and significance. Ask questions, DO NOT teach or lecture. Discover how your team members fill these needs and how the team can support each member in achieving them without the caveman.

The journey to the evolution of highly effective teams is scattered with the angry beatings and quiet disillusionment of cavemen everywhere. Effectiveness is against our nature. Only in the face of our inadequacies can we evolve, can we increase our ability to be intelligent in our actions, and can we assist others in there evolution.

The advantages of this growth is a happier, less stressful, and more productive life.

The consequences of not evolving, are a life full of reaction, stress and un-fulfillment.

The caveman will always be in you, the question is do you really want him around in your teams, friends, and families?

Today, evolution is a choice.

Why So Many People Fail In Affiliate Marketing

More and more people are lured into affiliate marketing and you might be one of them. Indeed, affiliate marketing is one of the most effective means of generating a full-time income through the Internet. It’s a fair deal between the merchandiser and his affiliates as both benefit from each sale materialized. Like in other kinds of business, a great deal of the profits in affiliate marketing depends on the affiliate’s advertising, promoting and selling strategies. Everyday, as affiliate marketing industry expands, competition heightens as well so an affiliate marketer must be creative enough to employ unique and effective ways to convince potential buyers to purchase or avail of the products and services offered.

Compared to traditional advertising practices, affiliate programs are more effective, risk-free and cost-efficient. But why do many people still fail in affiliate marketing? There are a lot of reasons and a lot of areas in the program to look into. The most critical aspect in the affiliate program is advertising. Many affiliate marketers fail in this aspect because they lack hard work, which is the most important thing in affiliate marketing and in all other kinds of business as well. Although it pays to be lucky, you cannot merely rely on it. Affiliate marketing isn’t as simple as directing customers to the business site. If you want to earn big, of course, you have to invest time and great amount of hard work in promoting the products. As earlier mentioned, the competition is very high and customers nowadays are very wise, too. After all, who doesn’t want to get the best purchase—that is, to pay less and get more in terms of quantity and quality.

Lack of preparation is also a reason why one fails in affiliate marketing, whether he is a merchandiser or an affiliate. Part of the preparation is researching. On the part of the merchant, he has to be highly selective in choosing the right affiliate websites for his affiliate program. In order to be sure he has the best choices, he must have exhausted his means in looking for highly interested affiliates whose sites are sure fit to his products and services. The affiliate site’s visitors must match his targeted customers. On the other hand, the affiliate marketer must likewise research on the good-paying merchandisers before he signs up for an affiliate program. He must ensure that the merchants’ products and services match his interests so he can give his full attention and dedication to the program. He can get valuable information by joining affiliate forums, comparing different affiliate programs and reading articles on affiliate marketing where he can get tips from experienced affiliate marketers on how to choose the best merchants and products with high conversion rate.

The website is a very important tool in the whole affiliate program. As an affiliate marketer, you should plan how your site is going to be, from domain name to the design, the lay-out, the content, and ads. Some users are particular about what they see at first glance and thus when they find your site ugly, they won’t read through the content even if your site has many things to say and offer. On the other hand, there those who want information more than anything else. Affiliate marketers with “rich-content” web sites are usually the ones who prosper in this business because the content improves traffic to the site. Websites with high quality contents—with relevant keywords and more importantly, right information about the product and not empty hyped-up advertisements—allow you to earn big in affiliate marketing even when you’re asleep. If you won’t be able to sustain the interest of your site visitor, you won’t be able to lead him to the merchants’ site. No click-through means no sale and thus, no income on your part.

Selecting a top-level domain name is also crucial to the success of the affiliate program. Lots of affiliate sites don’t appear in the search engine results because they are deemed by affiliate managers as personal sites. Major search engines and directories would think of your site as transient ones and thus, they won’t list it in the directory. Before you decide on the domain name, know first what you are going to promote. Many fail because their sites are not appropriately named, so even when they feature the exact products the customer is looking for, the customer might think the site is not relevant and thus, won’t enter the site.

Above all, an affiliate marketer must be willing to learn more. Certainly, there are still a lot of things to learn and so an affiliate marketer must continue to educate himself so he can improve his marketing strategies. Many fail because they don’t grow in the business and they are merely concerned about earning big quickly. If you want long-term and highly satisfactory results, take time to learn the ins and outs of the business. Continue to improve your knowledge especially with the basics in affiliate marketing ranging from advertising to programming, web page development, and search engine optimization techniques. Likewise, study the needs and wants of your site users and how different merchandisers compete with each other.

Keep on trying

What Is A Hedge Fund?

You’ll often see the title ‘hedge fund manager’ in the bios of some of Wall Street’s famous investment gurus. But what exactly is a hedge fund? How is different than any other fund? And how do you get in on the action?

Hedge funds are private investment partnerships that are usually offered to limited number of investors and require a significant initial minimum investment. Hedge funds are normally open to institutional or otherwise accredited investors. Those investors are also required to keep their money in the fund for a minimum period, usually one year.

Basically, hedge funds are mutual funds for the super-rich. They resemble mutual funds in the way investments are pooled and professionally managed, but they are significantly different in the way fund can cooperate.

Hedge funds are lightly regulated private funds that are usually characterized by unconventional investment strategies. These funds are generally more aggressively managed and use advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns. Regular investment funds are usually limited to ‘going long” and buying bonds, equities or money market instruments. Hedge funds also have the ability to "short" those instruments they believe will fall in price. Hedge funds are thus able to create more complex investment structures which can profit in times of market volatility, or even in a falling market.

In general, hedge funds are lightly regulated because it is believed they cater to sophisticated investors who need less protection. In the US, the majority of investors in the fund must be accredited. An accredited investor must earn a set minimum income annually and have a net worth of more than $1 million. Investment companies registered with the US Securities and Exchange Commission (SEC) are subject to strict limitations on the short-selling and use of leverage that are essential to many hedge fund strategies. Although hedge funds fall within the definition of an “investment company,” hedge funds often elect to operate with exemptions from the registration requirements by selling only to “qualified purchasers” or “accredited investors.” Hedge funds are also only sold via private placement and cannot be offered or advertised to the general public. So the funds trade a smaller pool of investors for fewer government restrictions.

While hedging is the practice of attempting to reduce risk, the goal of most hedge funds is to maximize return on investment. The first hedge funds that appeared in the 1950s tried to hedge against the downside risk of a bear market with their ability to short the market. Today, hedge funds use dozens of different strategies, including speculative investments. In fact, in many cases these funds can carry more risk than the overall market.

The hedge fund manager is the general partner or manager and the investors are the limited partners or members respectively. The manager generally makes all the investment decisions based on the strategy it outlined in the offering documents.

In return for managing the investors' funds, the manager will receive a management fee and a performance or incentive fee. Usually this management fee is computed as a percentage of assets under management, and the incentive fee is computed as a percentage of the fund's profits. In some cases the manager does not receive incentive fees unless the value of the fund exceeds a “high water mark.”

Other funds charge no fees until the funds pass specific performance goals. Typical fees for hedge funds are 20 percent of profits plus two percent of assets under management. Famous and successful managers often demand higher fees.

Today, some $1.2 trillion are tied up in some 9,000 hedge funds This is up 19 percent from 2005 and up 300 percent from 2001. At the end of 2004, 55 percent of the number of hedge funds, managing nearly two-thirds of total hedge fund assets, were registered offshore. The most popular offshore location was the Cayman Islands followed by British Virgin Islands and Bermuda. In the US, most funds are located in New York City, Stamford, Connecticut and Greenwich, Connecticut. London is Europe’s leading centre for the management of hedge funds.

Investment companies registered with the U.S. Securities and Exchange Commission (SEC) are subject to strict limitations on the short-selling and use of leverage that are essential to many hedge fund strategies. Although hedge funds fall within the statutory definition of an “investment company,” hedge funds often elect to operate with exemptions from the registration requirements by selling only to "qualified purchasers” or “accredited investors” Hedge funds are also only sold via private placement and cannot be offered or advertised to the general public.

Unlike mutual funds, hedge funds do not have to disclose their activities to third parties. Investors in hedge funds however are entitled to a higher level of disclosure on risks assumed and positions taken, and the investor often has direct access to the fund manager. A byproduct of this privacy is that there are no official hedge fund statistics.

Institutional Investor and Trader Monthly magazine annually ranks top-earning hedge fund managers.

Hedge funds are often targets of criticism. Their secrecy and lack of regulation have led to all kinds of allegations of dodgy dealings. The size of the assets held in these funds has also led to allegations that these funds have adversely affected bond markets on different occasions. US regulators have tried to impose restrictions on these funds but there attempts have been thwarted by the courts and the complexities of the funds and their offshore locations have created a regulatory nightmare for the SEC.

Some writers have concluded that hedge funds have evolved into little more than exclusive, high-fee mutual funds. Warren Buffett has little time for them either pointing out that mangers are rewarded for high variability, rather than high long-term returns.