Mutual Fund vs Hedge Fund

Investing in a mutual hedge fund can provide you with a number of benefits as an investor. While most investors are familiar with mutual funds, hedge funds are not as commonly understood. Here are a few of the differences between mutual funds and hedge funds.

Mutual Fund

The mutual fund is one of the most common investments in the world today. Anyone can invest in a mutual fund and it has a low level of entry. Mutual funds sell shares in a diversified portfolio to the public. Mutual funds are run by fund managers that pool the resources of many people together and use it to buy securities. Many mutual funds utilize common investments such as stocks, bonds, CDs, and treasury notes to make up the portfolio. There are many different types of mutual funds available that utilize different investment strategies for their portfolios. As an investor, you can choose the risk level that you are comfortable with and the type of investment that you like.

Mutual funds compare themselves against a certain benchmark in order to gauge performance. When times are good, they strive to be above that benchmark. When times are bad, they try to limit the amount of losses that they have below the benchmark. This gives them a good point of comparison for their investors and potential investors. When investors looking mutual funds this is one of the first criteria that is evaluated.

Hedge Fund

The hedge fund is not as commonly understood in the world today. Not everyone can invest in a hedge fund. In the United States, you have to prove you have a certain amount of net worth in order to be involved. Each hedge fund is different, however they are usually reserved for the wealthy. For example, you might have to prove that you are worth at least $2 million in order to get started in a hedge fund. If you cannot be so you will not be allowed into the fund.

Hedge funds also utilize a number of different investment strategies. While some do invest in normal securities like stocks and bonds, many of them do not. The investors of a hedge fund are typically looking for a way to diversify away from the traditional market. This allows them to keep their wealth when the market is down. Many hedge funds invest in things like FOREX, commodities, and futures as a part of their portfolio. They might even invest in things like art, real estate, website domains, and other investment vehicles that have very little correlation to other investments.

The media has portrayed hedge funds as a very high risk investment using a lot of leverage. While there are some hedge funds that are highly leveraged, they are not all like that. There are currently over 10,000 hedge funds to choose from. They all have different investment styles and strategies that they utilize. This type of investment gives high net worth individuals an alternative to the traditional investment market.

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