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High Risk Funds

High risk funds are defined as mutual funds, hedge funds or private investments that operate with a risk to demand a higher rate of profit return.

One high risk fund is a mutual fund. The Securities and Exchange Commission (SEC) is responsible for overseeing how the mutual fund companies are keep up with government standards.

These funds represent a no-load option. No-load mutual fund companies are the easiest and safest way to get into mutual funds. Some advisors are advising, to potential investors, that they stay away from these funds because of perceived problems. Reports indicate there are no major differences between no-load and load mutual funds. Load funds, generally termed front-end load carries a commission fee plus other fees (purchase, exchange and settlement).The basis for no-load mutual fund companies is that the buyer will not pay any transaction fees. Mutual funds are divided into open-ended or closed-ended funds. Open-ended funds are open to new buyers and the fund can continue to grow with no limit on the number of buyers. Closed-end funds open with a limited amount of shares. Once the shares are depleted, the fund manager closes the fund. Closed-ended funds are usually on the New York Stock Exchange or the American Stock Exchange. There are 4 types of mutual funds: Stock funds, Bond funds, Money market funds and Balanced (Asset Allocated Funds) or Life Cycle Funds. Stock funds are on the New York Stock Exchange, the American Stock Exchange and NASDAQ. Bond funds allow investors to gain interest from a company’s loan. The risk with this type of fund is the possibility of losing the principal invested in the bond. A hedge is another example of a high risk fund. This high risk fund does not require a filing with the Securities and Exchange Commission (SEC) so there is a smaller pool of investors willing to take part in a riskier portfolio strategy.

In addition to a hedge fund, there is a different high risk fund that is used by private corporations. This high risk fund does not require a initial public offering (IPO) so the stocks are offered to a selected group of investors that are seeking a high-risk, high-yield investment.

Another example of a high risk fund is an Emerging Market fund. This fund deals with countries outside the United States. Most of the stocks are held in Brazil, Russia, India and China. This high risk fund involves mutual funds and electronic fund transfers (EFT).

The last type of a high risk fund is a high-yield investment. This fund operates with bonds that carry an undervalued price. This fund is also called a junk bond. When a company, that is in distress issues these bonds, an investor will still continue to see an increase on the profit return.

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