Investment funds pool the money of many investors and invest according to a specific strategy. Funds come in various types, each with differing features. Generally, publicly offered funds—such as mutual funds, exchange-traded funds, closed-end funds and unit investment trusts—must be registered with the Securities and Exchange Commission (SEC) as investment companies. Private investment funds (often called hedge funds) are often exempt from registration.
Funds can offer diversification and professional management—and they can feature a wide variety of investment strategies and styles. As with any security, investing in a fund involves risk, including the possibility that you may lose money. And how a fund performed in the past is not an indication of how it will perform in the future.
Some funds, such as hedge funds, do not register their shares with the SEC. This means they are not subject to the same regulatory standards that apply to mutual funds and other funds registered with the SEC.