A fund that is managed privately and is an investment fund is called a hedge fund. It is similar in many ways to a mutual fund particularly because it pools the money of a person so that it will diversify but they also have differences.

The mutual fund is a huge pool of a person’s money which the investors make to be used in purchasing a variety of multiple stocks. The investors pool the money they have into a specific mutual fund instead of purchasing a single stock and since the investors pooled the money they have they can already afford to purchase a variety of stocks.

A difference can already be noted with the minimum investment that is required to be initially invested. In a typical mutual fund an investor can start with just two thousand five hundred dollars and at time even lesser while with the hedge funds, investors usually need to begin their investment with twenty five thousand dollars up to a million dollars even that’s why the Hedge funds are investments commonly restricted to the rich and aggressive investor.
 
The mutual funds carry with them multiple regulations just like a marine camp. The investors have to strictly follow the rules set by the SEC which regulates the mutual funds. The investors are often given restrictions on the investments they make. The hedge funds as of this time are not SEC regulated so they don’t face the same problem. The investors feel the freedom why they invest in the other variations of the investments for speculations like the futures and the options. The investors have the advantage to short selling and at the same time buy on a certain margin in order to increase the performance of the hedge fund.

The shareholders of the Hedge funds feel the risk when they calculate the fees that needs to be paid in the beginning even if the fee for the management is considerably small however the fund takes the initial twenty percent of profits which means that the hedge fund needs to earn a larger return so that the fees are all worth it. However even if the fees are high as well as the minimum investment, the hedge funds are still not bad and can be good for some people. Like if an investor has a huge sum of money in savings and his or her portfolio is really conservative, a hedge fund is not a negative idea however the sufficient research and information is still necessary.