A Hedge Fund is an investment pool contributed by a limited number of investors setting a specific goal in mind- mostly to maximize returns and minimize risk. Looking at the nature of hedge funds it can be rightly said that it is typically suitable for qualified investors and managers. The hedge fund is operated by a manager who invests the money in different assets to achieve his goals. Different type of hedge fund has different goals. But the common goal of all hedge funds is making money despite market fluctuation. Hence, hedge fund managers often act like traders. Hedge funds got their name as investors hold their money for both long and short stocks despite the market volatility (called "hedging").
Hedge fund managers preach a strategy to minimize hedge fund risk. This strategy can include being a hedge fund that is particularly long or short on all their stocks, or a hedge fund that specializes in a certain type of investment that can range from common to patent stocks. One of the biggest distinguishers about hedge funds is, they are always available to "accredited investors." As per Government regulations, a hedge fund manager can only accept 35 non-accredited investors to any firm. A manager also maintains hedge funds taxation.
There are several different kinds of strategies of hedge funds and some of the most common types are macro hedge funds (investing in stocks, bonds, and other currencies hoping that there will be a change in the macroeconomic variable), Equity hedge funds (investing in stocks or stock indices) and Distressed hedge funds (it is involved in loan payout and restructurings). Make sure you are prepared and suitable before investing in a hedge funds venture. Firstly, you need to decide what are your goals what would you invest in, and how much risk is bearable. You should research different funds by keeping your capital and desires in mind.