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What’s the difference between a mutual fund and a hedge fund?

They’re both investment opportunities but one is only for the superwealthy. A mutual fund is managed by an investment company that uses the money from selling shares to the public to invest in a range of stocks and bonds. Shareholders get dividends and their share prices can increase in value. A hedge fund is also managed by a company and invests with money from people who buy in, but those people are limited and loaded. Individuals are courted by the hedge funds to invest millions of dollars each. Why do they do it? Hedge funds operate under less stringent laws and regulations and therefore shareholders have an opportunity to make a lot more money, but at greater risk because they short stocks (predict they will decrease in value) something not allowed in mutual funds. So unless you work for a hedge fund, or your second cousin in Connecticut does, you’re not going to have anything to do with one.

-- Alonna Friedman

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