Investing in funds that hope for financial Armageddon? They’re a real thing and some investors believe they are a new necessity. Black swan funds, as they are often referred to, are in the simplest of terms, an insurance policy against a financial crisis. You pay money into a health plan hoping you don’t need to use the hospitalization coverage, but if you do, you know that you are covered. A Black Swan fund operates in a similiar way – you will lose the money that you’re putting into it at the time, but if anything ever happens, you stand to gain a pretty penny.
After all that has been happening with world markets in the past years, Black Swan funds sound like a must for any investor. As Zvi Bodie, a professor of finance at Boston University said, “In the last decade, we saw two stock market crashes, which wiped out any gains for investors over the decade and meant disaster for those who had to take their money out to meet big expenses at market lows.” Bodie believes that has in turn made current market investors more aware of risk. This heightened awareness could cause Black Swan funds to grow in popularity but as some point out, these funds are designed to protect against the last catastrophe – not the next one that lies ahead.
Would you put your money into these types of funds? Or do you think this is just another Wall Street fad?
Read more on Black Swan funds, here.
Is your retirement plan diversified enough? Find out here by using our retirement calculator!
