9.9%. That's the total cumulative return of the S&P 500 from January 1999 to December 2009.

An investor who plunked down $10,000 in an S&P index fund in 1999 was sitting on just $10,990 11 years later. That's a measly annualized return of 0.9%, far short of inflation, and worse than you would have gotten from just keeping your money stuffed in a savings account.

Let's call it what it is: 11 years of straight-up market misery. Kind of makes you think buy and hold really is dead after all.

Then there's this number: 158.2%.

That's the net cumulative return of T2 Partners over the same period. That works out to 9% per year, turning $10,000 into $26,000.

How'd they do it?
T2 Partners is a small fund run by Whitney Tilson and Glenn Tongue, hard-nosed value hunters with a proven knack for finding investment opportunities where very few are willing to tread. We're talking special situations, spinoffs, stock warrants, and even companies in bankruptcy.

Overall, T2's portfolio was up 31.9% in 2009, clobbering the market. Tilson and gang are at it again in 2010. Through September, T2 is up 14.1% versus just a 3.9% rise for the S&P 500.

For T2, it's a simple formula. Tilson and team always keep at least 20% of T2's portfolio short. The fact that most stocks underperform a diversified index over time makes that a prudent strategy. But it also makes a lot of sense in times when even the best stocks take it on the chin. By betting against a slew of bad performers, T2 was able to stay afloat back in 2008 when most portfolios and mutual funds sank to the bottom.

Investing the T2 way
Most of us are pretty anxious about the stock market right now. Do we go higher from here, or do we crash back to those ugly March 2009 lows? What if the next 10 years are just as bad for the stock market as the last 10? What does that mean for our financial futures, our standard of living, our retirement plans?

The great thing about the long-short approach is that we don't necessarily have to worry about the general direction of the stock market. Just like Tilson and team, we can score big returns in any market, as long as we're willing to dedicate a good chunk of our portfolio to short positions. And best of all, you don't need to invest in a hedge fund like T2 to do it.

Later this month, The Motley Fool will unveil Motley Fool Alpha, a new investment service that seeks to bridge the gap between traditional stock newsletters and the real world of hedge fund investing. John Del Vecchio and I will be heading up this venture, drawing upon our years of experience in the hedge fund world. Motley Fool Alpha will play offense AND defense -- investing opportunistically in both long and short positions, with the singular goal of compounding our capital at 15%-plus over time.

Why Motley Fool Alpha?
The hedge funds where John and I made our names were incredibly profitable for their investors: for example, my tenure at Centaur Capital from October 2003 to December 2009 produced an annualized gain of 15.4%, net of all fees. That's against a virtually flat return for the S&P 500 over that same timeframe.

But funds like these are normally only available to accredited investors with a net worth of at least $1.5 million. We wanted to provide those kinds of life-changing returns to those who may not yet be accredited and/or just prefer to manage your investments yourselves. In Motley Fool Alpha, John and I will be managing a real-money portfolio consisting of our actual capital, and you'll have the opportunity to replicate our portfolio, trade for trade, in your own account.

Play offense AND defense
The Motley Fool Alpha investing approach blends aggressive opportunism with an equal emphasis on sleeping well at night. You'll see us make concentrated bets, but with a careful eye to overall portfolio exposure. You'll see us emphasize classical measures of value such as dividends and free cash flow yields, but with the occasional willingness to engage in a bit of intelligent speculation. At times we'll have the look of dyed-in-the-wool value investors, while at other times we may speak the language of market technicians. Our philosophy may defy traditional labels, and yet there is a consistency to our approach: seeking opportunities that have significantly more upside than downside.

Some might call what we do a trader's version of value investing. Our decision-making framework is grounded in fundamental business analysis and valuation, but we're not oblivious to fear, greed, and market momentum. In balancing these long- and short-term forces, our aim is to think long-term but act short-term: have a long-term mind-set in how we think about businesses, the economy, and our investment results -- but with a short-term, opportunistic willingness to capitalize on market volatility by trading around positions and reshuffling our portfolio based on changing opportunities and risks.

Our approach is aimed at the goal of defending and growing capital prudently over time. Our overall goal is to achieve portfolio returns of 15% annualized, measured over rolling three-year periods, while resisting significant losses.

Sound good? It does to me, too, so much so that I will be putting nearly my entire net worth into the portfolio. John will be investing, too. A small group of investors will be invited to join us. If you would like to learn more as soon as details are available, click here.

Matthew Richey is excited to be back at The Motley Fool, teaming up with John Del Vecchio on Motley Fool Alpha. Alpha senior analyst Matthew Argersinger contributed to this article, which was adapted from a separate article titled "Lost Decade for Stocks? Not If You're Long-Short" that was published Sept. 9, 2010.