What is an 'Investment Company'?
What is an 'Investment Company'? By Paayi

Investment Company is a company that deals mainly with the business in which the capital is invested in different kinds of financial securities.

Investment Company is also referred to as the Fund Company.  Investment Company utilizes two most common types of funds. One is the closed-end fund, and the other one is open-end fund.

A closed-end fund is the one in which the IPO or the initial public offering is used to raise the fixed amount of capital whereas in an open-end fund is the one in which there are no restrictions on the total amount of shares that a particular resource can issue.

The investment companies in different countries are regulated and controlled by the government and its authority.

For instance, in the US the investment companies are regulated by the SEC, i.e., Securities and Exchange Commission. The SEC was established and is controlled by the ICA, i.e., the Investment Company Act of 1940.

 

Understanding the Investment Company In Detail

The investment company is an entity that can the publicly owned, or it can be held by any private entity. The primary job of the investment company is to deal mainly with selling and buying the funds of the market to the public.

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Furthermore, the investment company makes sure that the investors are given a lot of options and variety of funds from which they can select their services.

Some of the services that are offered by the Investment Company are mentioned below:

  1. Portfolio Management
  2. Record Keeping
  3. Custodial
  4. Legal Accounting
  5. Tax Management Services

 

Features of an Investment Company

There are several features of an investment company that highlights the aspects in which the investment company deals and can offer help. Here is a list of some of the features of an investment company in the market:

The investment company has a close-ended structure which means that amount of shares that they issue are a fixed for a particular period. The shares that are set are traded on the stock market as several buyers and sellers are available.

Another feature of the investment company is that it has a board of directors. The boards of directors are an independent body that exists in almost all types of investment companies.

The body is created mainly to keep a check on whether the interests of the investor are protected or not. Moreover, they also offer advice and come up with ways through which the performance of the company can be improved.

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The investment companies are also listed on the stock exchange market. As if they are not mentioned on the stock exchange market, they cannot operate. Apart from this, one investment company can be listed on more than one stock exchange market.

The investment companies also offer its shareholders a lot of rights. Once the shareholders have bought the shares in an investment company, then several rights are granted to them. The shareholder can make use of those powers whenever they feel that it is necessary and needs to be done.

Apart from this, all the investment companies have the right to make the particular investment, which means that the business can decide whether they want to invest the money of the shareholder or not. It depends on them that in which sector they want to spend.

In many investment companies, the element of investment gearing is present. Investment gearing is the process by which the investment companies tend to borrow money from the outside sources. The borrowed money is just a way of making additional investments. The main aim of such other investments is to make as much profit as they can.

 

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