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Investor.gov
U.S. Securities and Exchange Commission


AUXILIARY HEADER

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MAIN NAVIGATION

 * BACK
 * Introduction to Investing
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    * Getting Started
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      * Five Questions to Ask Before You Invest
      * Understanding Fees
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BREADCRUMB

 1. Home
 2. Introduction to Investing
 3. Glossary


MAIN NAVIGATION (GLOSSARY)

 * Save and Invest
   * Define Your Goals
   * Diversify Your Investments
   * Figure Out Your Finances
   * Gauge Your Risk Tolerance
   * Learn About Investment Options
   * Pay Off Credit Cards or Other High Interest Debt
   * Save for a Rainy Day
   * Small Savings Add Up to Big Money
   * Understand What It Means to Invest
   Expand
 * Invest For Your Goals
 * How Stock Markets Work
   * Public Companies
   * Market Participants
   * Types of Orders
   * Types of Brokerage Accounts
   * Stock Purchases and Sales: Long and Short
   * Executing an Order
   Expand
 * Investment Products
   * Auction Rate Securities
   * Bonds or Fixed Income Products
     * Bonds
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     * High-yield Corporate Bonds
     * Municipal Bonds
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   * Certificates of Deposit (CDs)
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   * Commodities
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   * International Investing
   * Mutual Funds and Exchange-Traded Funds (ETFs)
     * Alternative Mutual Funds
     * Leveraged Loan Funds
     * Exchange-Traded Funds (ETFs)
     * Index Funds
     * Money Market Funds
     * Mutual Funds
     * Smart Beta, Quant Funds and other Non- Traditional Index Funds
     * Target Date Funds
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   * Options or Derivatives
   * Private Investment Funds
     * Hedge Funds
     * Private Equity Funds
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   * Real Estate Investment Trusts (REITs)
   * Retirement Savings
     * 401(k)
     * 403(b) and 457(b)
     * IRA (Individual Retirement Accounts)
     Expand
   * Stocks
   * Structured Notes with Principal Protection
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 * What is Risk?
 * Role of the SEC
   * How to Submit Comments to the SEC
   * Researching the Federal Securities Laws Through the SEC Website
   * The Laws That Govern the Securities Industry
   Expand
 * Glossary




HEDGE FUNDS

Like mutual funds, hedge funds pool investors’ money and invest the money in an
effort to make a positive return.  Hedge funds typically have more flexible
investment strategies than mutual funds.  Many hedge funds seek to profit in all
kinds of markets by using leverage (in other words, borrowing to increase
investment exposure as well as risk), short-selling and other speculative
investment practices that are not often used by mutual funds.

Unlike mutual funds, hedge funds are not subject to some of the regulations that
are designed to protect investors.  Depending on the amount of assets in the
hedge funds advised by a manager, some hedge fund managers may not be required
to register or to file reports with the SEC.  Hedge funds, however, are subject
to the same prohibitions against fraud as are other market participants, and
their managers owe a fiduciary duty to the funds that they manage.

Hedge fund investors do not receive all of the federal and state law protections
that commonly apply to most mutual funds.  For example, hedge funds are not
required to provide the same level of disclosure as you would receive from
mutual funds.  Without the disclosure that the securities laws require for most
mutual funds, it can be more difficult to fully evaluate the terms of an
investment in a hedge fund.  It may also be difficult to verify representations
you receive from a hedge fund.

 

 Learn more


FEATURED CONTENT


INVESTING QUIZ – AUGUST 2022

Test your knowledge of mutual funds and ETFs!


TIPS FOR TEACHERS: INVESTING FOR RETIREMENT

Read our Investor Bulletin to learn about 403(b) and 457(b) retirement savings
plans and how to make informed decisions when investing for retirement. 


CRYPTO ASSETS

Expand your knowledge about investment opportunities in crypto assets on our
spotlight page.


TAKING STOCK IN TEEN TRADING

It’s never too early to start thinking about saving and investing. Our
Director's Take article can help parents and teens learn how to start making
sound financial decisions together.


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