Understanding Hedge Funds: From Simple Vehicles to Complex Trading Houses

What is the primary goal of short selling in the context of hedge funds?

• To increase the value of a stock

• To bet against an investment

• To eliminate all risks

• To diversify a portfolio

In the hypothetical scenario, why is it beneficial to short sell Apple shares while buying Samsung shares?

• To eliminate all investment risks

• To profit from Samsung's market dominance

• To increase the overall market value

• To balance potential losses from market downturns

What is a common misconception about hedges in investment portfolios?

• They guarantee high returns

• They expose investors to different types of risk

• They are only used by large corporations

• They completely eliminate risk

How have modern hedge funds evolved from their original purpose?

• They focus solely on eliminating risk

• They have become high-risk trading houses

• They only invest in technology stocks

• They no longer use short selling

What is the relationship between risk and potential profit in hedge funds?

• Risk and profit are unrelated

• Low risk always results in high profit

• High risk guarantees high profit

• No risk means no potential for profit