Thursday, September 27, 2007

mutual fund V/s hedge fund

The similarities:
Both mutual funds and hedge funds are managed portfolios.
This means,that a fund manager picks securities that he/she feels perform well and buys them.
then fund is divided and then sold to investors,who participate in the gains/losses of the holdings. The main advantage to investors is that they get instant diversification and professional management of their money.

The differences:
Hedge funds are managed much more aggressively than their mutual fund counterparts.
Hedge funds are able to take speculative positions in derivatives such as options and have the ability to short sell stocks.
it means that it's possible for hedge funds to make money when the market is falling.

Mutual funds,are not permitted to take these high-risk positions and are typically safer as a result.

Hedge funds are only available to a specific group of investors with high net worth.while any person can buy the mutual fund.
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