This is part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

An overriding concern of investors is saving for retirement. Yet the data indicates that, when you consider the ravages of fees, inflation and taxes, the average equity investor actually loses money.

These investors would have been better off not investing at all.

The first rule of intelligent investing is not to lose your money. Here is one suggestion: Don't invest in hedge funds.

I have never understood the underlying premise of these funds. We know that only a small percentage of traditional mutual funds equal or beat their benchmarks over the long term. Is it really possible that hedge fund managers have some special insight that has eluded the best and brightest on Wall Street?

Not according to the data.

One study showed that on average every major category of hedge funds provided lower risk-adjusted returns than the S&P 500 from 1995-2003.

Another study demonstrated that, after fees, 80% of the hedge funds studied provided no added value.

As if that was not bad enough, a recent study concluded the huge fee structure of hedge funds could attract "mediocre managers and con artists" to the market.

Recently, we have seen a number of large hedge funds implode. More are sure to follow.

When investing for retirement, don't be seduced by the promise of excessive returns made by hedge fund promoters. They come at the price of high risk. In addition, there are added problems of lack of liquidity, lack of meaningful regulation and lack of transparency.

My advice? Just say "no."

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008). Visit his website at Smartestinvestmentbook.com.

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