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Hedge Fund Vs Mutual Fund: Common Differences Between The Two

This article is about hedge fund vs mutual fund. Mutual funds and hedge funds are the two most popular types of Investments.

In this type of investment, investors give their funds to a professional fund manager. This professional invests these funds in different types of securities. With a mutual fund, investors use the opportunity to invest their funds in a variety of securities at a relatively low cost.

Hedge funds, on the other hand, refer to unregistered private Investments. This type of investment includes a variety of trading techniques. For example, you put your money in securities with diversified risk. Let’s get into details and find out more.

Primary Differences Between Hedge Fund vs Mutual Fund

Although there are a lot of differences between the two. We are going to talk about some primary differences between them. Read on to know more.

Hedge funds or (HF) refer to a portfolio investment that allows only a couple of accredited investors to get together to purchase assets. On the other hand, mutual funds involve a professionally managed investment approach. In this case, the professional collects funds from many investors to buy securities.

In the case of hedge funds, absolute returns are sought. By contrast, mutual funds refer to relative returns that you can earn from securities. So this is a major difference between the two.

HF involves aggressive management. This approach uses the advanced risk management and its investment techniques to earn good returns. So, if you are looking for a great return on your investment, investing in hedge funds is the right choice for you.

In the case of mutual funds, there are many owners involved. In fact, it may involve thousands of owners. On the other hand, hedge funds involve a few members. These small owners invest small amounts of money.

As far as the type of investors is concerned, these investors have a high net worth. By contrast, mutual funds involve small, retail investors that don’t have a lot of money to spend.

For HFs, the regulations are not that strict. On the other hand, strict regulation is done in order to regulate mutual funds or (MF) And these regulations are done by a separate entity.

In mutual funds, the management cost is dependent on the percentage of assets. By contrast, hedge funds involve fees that depend upon the performance of assets.

In the case of HFs, a significant part of ownership belongs to the fund manager as well. This is not the case with MFs.

The reports are released publicly in case of mutual funds. In hedge funds, only investors receive this information. And this information is not made public at all. In other words, this difference involves privacy.

Conclusion regarding the hedge fund vs mutual fund

In short, if you are just starting out, make sure you invest your hard-earned money based on your resources and personal preferences. If you have plenty of money to invest, you may consider HFs. On the other hand, if you have a limited amount of money, you may invest in MFs. Hope this helps.


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Chris Wick

Chris Wick is Chief Editor with over 17 years experience on the Information Highway, Chris loves to contribute to this website as well as numerous others with ALL types of interesting subjects from Politics, Sports, Cooking to Conspiracy Theory, as you can see, he can't sit still in one place... Oh, and he loves coffee!

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