Aex <VendettaNine[at]gmail.com> writes:

- quote -

Investment banks *originate* (ie. create) stocks and bonds
for the issuers (the companies which go public via sale of
stock or borrow money on the public markets by issueing
bonds). They sometimes hold on to some of those issues
in their own portfolios and trade for their own profits,
but their main job is creating these securities.

Mutual funds are pools of investor's money which is used
to buy these investments. They are generally open to the
public to buy up and participate, and they are regulated
somewhat strictly (compared to those below). The mechanics
of how this work is way beyond the scope of this quick
e-mail. (see also "closed-end funds" and "Exchange-traded
funds" or ETFs).

Hedge funds are similar but they are far less regulated
and they are not open to the public to participate in.
Hedge funds may invest in almost anything and may borrow
money, sell things short, and invest in illiquid assets.
They have limits on the number of folks who may invest
in them, and those folks generally have to be institutional
investors or very wealthy.

Private equity groups also pool "sophisticated" investors
money (like hedge funds) but they are generally of a
more specialized purpose - they buy up entire companies
rather than stock that trades on exchanges. Sometimes
they borrow huge heaps of money to buy up enough of an
existing public company to take it private - ie. to buy
the whole thing up. Sometimes they just buy parts of
other companies up.

Most regular individuals have nothing directly to do
with investment banks (they buy funds or if they buy
individual stocks, it's usually on the secondary
market, not at issuance). And they have nothing at
all to do with hedge funds or private equity.

If you have a specific question, go ahead. But I'd
suggest doing a little reading first. I like Eric
Tyson's For Dummies books a lot - see his books
Personal Finance for Dummies and Investing For Dummies.
The names of the books may be a little insulting, but
the content is very good and very easy reading.


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In article
<45452fa6-f5ba-45ef-88cc-62867c1f781d[at]a18g2000pra.googlegroups.com> ,
Aex <VendettaNine[at]gmail.com> wrote:

- quote -

You are asking for a non-trivial amount of work here. Perhaps
this is a case where you could do some basic reading on the topic,
then come back with some more specific questions.

-john-

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I'm a novice learning the ropes so forgive my silly questions.

What is the difference between investment banks, mutual funds, and
private equity groups, and hedge funds? They seem pretty similar in
that they have a wide variety of strategies to make money. How do
they differ?

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