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If you're like a lot of people, you've probably heard the term "hedge fund" thrown around in the news and on television, but maybe you never really knew what it meant. The world of investing and finance can be intimidating and confusing without at least a little guidance, and it's hard to know where to turn. When it comes to hedge funds, of course, the first step is determining if this type of investment is the right fit for you.

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1. What Exactly is a Hedge Fund?

In a nutshell, hedge funds are big investment pools owned by private companies. They take the money from their investors and invest it elsewhere, in hopes of attaining large financial gains. They can invest in a myriad of ways, such as real estate, stocks, etc. There are no restrictions on how they invest the money, and the managers are typically covered as limited liability corporations or limited partnerships, which insures them in the event the fund goes bankrupt.

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