Investment Company
“An investment company” is a company that issues securities and is primarily engaged in the business of investing in securities. It invests money on behalf of its investors who in turn shares the profits and losses in proportion to the investor’s interest in the Investment Company. The performance of an investment company will be based on the performance of the securities and other assets that the investment company owns. Investment companies are regulated primarily under the Investment Company Act of 1940 and the rules and registration forms adopted under that Act.
In United States of America, investment companies are categorized into three types:
• Mutual funds (which are also called as open-end funds)
• Closed- end funds (which are called as closed-end companies)
• UITs (which are legally known as unit investment trusts)
However, there are many benefits to join an investment company such as investor can get a diversified portfolio through a single investment. And investors can get access as well as exposure to a wide ranging group of shares of different companies. You can enjoy the benefit of tax managed investment with relative consistency in returns.
But be careful while selecting any investment company for your investments and get all the detail information about the laws related to this issue. Also, before purchasing any shares of an investment company, read all the documents carefully before investing including its prospectus and most recent shareholder report.