Mutual Funds vs. Hedge Funds -- the differences:

  • Mutual funds are operated by investment companies, regulated by the SEC, the IRS and other agencies and entities.
  • Money for the funds is raised from the public. Usually, very little of the investment company's own money is actually invested.
  • Investors share equally in gains and losses proportionate to their investment.
  • Mutual Funds offer investors professional management and usually offer investment diversification.
  • Mutual funds' choices of investments are more limited and restricted than those of hedge funds.
  • Domestic Mutual Funds have disclosure requirements and are otherwise heavily regulated. These regulations restrict the Fund from purchasing many types of derivative instruments, leveraging, short-selling, real estate and commodities.