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How do I know if I should invest in a hedge fund or a mutual fund?
Asked by John Hutter

Answer By Julie Scuderi

A mutual fund and a hedge fund are two very different things, so before you invest in either, you should know the basic differences.

Mutual funds are mainly limited to stocks, money market accounts, and bonds, though some exceptions can be made. This is why the market has such an impact on mutual funds. Meanwhile, Hedge Funds may invest in a variety of alternatives including futures, PIPE deals, real estate, art, even website domain names. This is why the market does not necessarily have an impact on hedge funds.

Anyone can invest in a mutual fund. In contrast, there are strict regulations as who can invest or even look into a hedge fund. Since hedge fund are more riskier than mutual funds, the Securities and Exchange Commission doesn’t want the average Joe to lose his retirement in one risky hedge fund.