In today's financial markets, investors have many different money investment vehicles available to them. Since mutual funds came along, people who know nothing about stocks are now investing. Different types of managed funds have become available too. How do they differ?
Managed funds come in many forms. One of those forms is the mutual fund. Mutual funds maintain an asset allocation model based on its particular objectives. They are periodically rebalanced by the fund manager to maintain that asset mix.
The Securities and Exchange Commission (SEC) requires that mutual funds adhere to the agency's own set of rules. One such rule is that the SEC restricts the mutual fund manager from performing the riskier types of trades as would be found in a hedge fund. Thus, the mutual fund is a more restricted type of managed fund.
Tools for Average Investors
The biggest reason why mutual funds have gotten so popular is that almost anyone can invest in them. Some of these funds only require a deposit of a few hundred dollars to get started. This is one of the major differences between mutual funds and other types of managed funds. For instance, investors have to earn at least $200,000 annually ($300,000 jointly) to qualify for hedge funds.
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