I’ve been trying to follow the Wall Street bets situations, but I can’t find a simple definition of hedge funds. Help?
In: Economics
Actual ELI5:
A normal fund invests in stocks and bonds. Basically you invest in cash-generating machines, which makes a lot of sense long-term. But nothing else is allowed.
A hedge fund may invest in anything, usually derivatives but can really be anything. This is **more like taking bets**. So they take a bet with someone else on the market. “We think this cash-generating machine will generate _less_ money next year” and someone is on the other side of the bet. This is much more risky, includes different regulation, may go in the opposite direction of the market (hedge) and is not long-term in itself since it needs new bets continuously.
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