Investment Company

Investment companies are legal entities that carry out their activities on the basis of a license, and therefore have the right to conduct brokerage and dealer operations.

Operational principle

Investment companies are usually involved in the issuance and sale of their own securities, and from the proceeds, they purchase securities of various companies and banks. At the expense of this clients receive income. This is asset management in simple terms.

To ensure depositors receive a stable income, their money is pooled together and invested in various projects. Profits are generated not only by the pooling of funds, but also by the competent actions of the financial manager.

Functions of Investment Companies

• Operations on the purchase and sale of securities;
• Operations to distribute capital in different directions to reduce risks.

Investment Company services are available to a variety of investors: both large and small. The income the investor receives depends on the success or failure of the investment. The companies themselves receive a commission from the profit and % for the deposit management. Investment companies are interested in a large number of successful operations.

Classification of Investment Companies

Investment companies are divided into open-end and closed-end. Investment companies, which are closed, are involved in share issuance on a limited basis, unlike open ones.

Private investors do not have the opportunity to cooperate with closed-end investment companies. These companies do not provide services on trust management.

Open-end investment companies, on the contrary, cooperate with private investors.

Investment companies should be chosen by patient and cautious investors, who do not bet on the maximum level of profit, but on the safety and stability.

Open-end investment companies are subdivided:

• Which really manage clients' money;
• Which do not show some information about themselves;
• Which do not carry out investment activities at all.

Investment companies in the first category actually take care of their clients' funds. They conduct operations with a high level of reliability and can always confirm all their actions. Usually it is a practice of such companies to provide depositors with reports on their work and detailed monitoring. Also, each client can see the income that has been received thanks to their funds.

But there are still companies in the market that provide pseudo-trust management. Their task is to convince the investor in the efficiency of their work, and the profit, which the investors see is unreliable.

The third type of investment companies are financial pyramids. In the 90s of the last century they were especially widespread. Now, by the way, they also occur quite often.

Employees of such investment companies do not even falsify financial statements. And sometimes they openly say that the company is a financial pyramid. And, unfortunately, there are those who trust such investment companies with their money. The amount of profit, which they show to their clients, consists entirely of other investors' money.