Hedge Fund Vs Mutual Fund - Knowing Important Differences

Posted by The Winvest Investment Fund on May 12th, 2021

What is a mutual fund? In essence, a mutual fund is a legal entity— typically an LLC or corporation—that is professionally managed by an investment manager. Mutual funds may focus on different asset classes such as stocks, bonds, money market instruments, or any combination thereof. Some mutual funds are actively managed to mean that its manager actively buys and sells the assets it owns, as opposed to being passively managed, which means much less buying and selling by the investment manager.

What Is a Hedge Fund?

Hedge Fund Manager are also legal entities, commonly LLCs or partnerships, and on occasion, corporations. They are similar to the mutual fund in that they are also a pooled, professionally-managed investment product. Hedge funds may invest in any asset classes usually including stocks and options, but can include any asset, including but not limited to, real estate, fine art, cryptocurrency, and many more. Hedge funds are not legally authorized for all persons or businesses/organizations, they are limited by Congress to ensure that those who invest in them have the resources, understand the risks, and can endure any poor performance.

These restrictions were put in place after the stock market crash of 1929.

Mutual funds typically have very low investment minimums, sometimes as low as 0, depending on the fund design. Hedge funds on the other hand frequently have very high investment minimums, 0,000 is not uncommon, but may have minimums as low as ,000.

Mutual fund liquidity is often very high, meaning mutual fund holders can buy or sell more of their shares at just about any time. Hedge funds, as is often the case, do not have that benefit built into their structure but may, on occasion, have high liquidity standards.

Perhaps even letting their investors buy or sell their shares as much as once monthly.

We hope this article will shed a more clear light on hedge fund vs mutual fund.

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