Mutual fund:A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Mutual funds are regulated investment products offered to the public and available for daily trading. Mutual fund companies rely on economies of scale to generate profits. Mutual fund fees generally fall into two big buckets: Annual fund operating expenses: Ongoing fees toward the cost of paying managers, accountants, legal fees, marketing, and the like. Shareholder fees: Sales commissions and other one-time costs when you buy or sell mutual fund shares. Hedge Funds:Hedge funds are private investments that are only available to accredited investors. Hedge funds are known for using higher risk investing strategies with the goal of achieving higher returns for their investors. Hedge funds are rarely accessible to the majority of investors; instead, hedge funds are geared toward accredited investors, as they need less SEC regulation than other funds. An accredited investor is a person or a business entity who is allowed to deal in securities that may not be registered with financial authorities. Hedge funds are also notoriously less regulated than mutual funds and other investment vehicles. Therefore, option 2 is NOT a correct statement.