Hedge Fund

Definition: A fund allowed to use a number of strategies to make money.  Because hedge funds are restricted on the number of people that can invest in them, they typically require that you invest at least $250,000.  Hedge funds pride themselves on being able to make money when the stock market drops.  However, some hedge funds are very risky.

TeenAnalyst Advice: Hedge funds come in all different types of flavors: market neutral, currency, interest rates, short funds, special situations, and mergers and acquisitions.

Hedge funds don't face the same regulations so they can use advanced investing techniques, as well as futures and options, to achieve higher rates of returns.

A hedge fund makes money by taking the first 20% of the profits.  If it has a couple bad years in a row, the company won't be making any money.  That's why few hedge funds survive two or three consecutive bad years.