Hedge Funds, Mutual Funds and Exchange-Traded Funds

when it comes to all three fun types investors pool resources and each participant basically owns a slice of the pie however this is where the similarities end hedge funds are only available to sophisticated players such as accredited investors and institutional investors the general public does not have access to them they're far less regulated than other options and pretty much everything goes they can buy short sell and gauge and leverage trading and so on their main goal is making money regardless of how the market is doing in other words investors expect good returns during times of economic boom as well as during downturns mutual funds are available to the average investor even if you only have let's say low four figures to invest since the general public has access to them they're strictly regulated and therefore far more let's say tame than hedge funds simply book mutual fund managers have far less options than hedge fund managers when it comes to what they invest in how they invest and so on their goal is not making money in any environment like with hedge funds but rather performing better than the market in other words a stock market oriented hedge fund manager will try to beat the let's say SMP 500 but if there's a stock market crash all stock market oriented mutual funds will probably perform poorly exchange-traded funds or ETFs are basically funds that are created on exchanges meaning that you can sell your slice of the pie or a percentage of it in real time with mutual funds you have to wait until the end of the trading day for the price to be set where as hedge funds are even more illiquid frequently requiring people to lock in their capital for an extended period of time such as a year or more performance-wise the goal of an exchange-traded fund is to track the market not perform better than the market like a mutual fund not perform well in any environment like a hedge fund it's a far less fund manager dependent option and of course fees tend to be lower as well broadly speaking that's pretty much it