Investing through an investment company is a way to diversify your portfolio. This is because these companies pool funds from many investors and invest them in a variety of securities. This can help you to diversify risk and to earn a higher return.
These companies also provide professional investment management. They may be a regular corporation, a limited liability company, or a partnership. The Securities and Exchange Commission (SEC) regulates these companies. These companies are primarily in the business of investing, trading, and managing securities. Investment companies may also be hedge funds.
Usually, investment companies invest in securities that meet the goals of the fund. Investments may also include real estate properties, securities sold short, and derivative instruments. These investments are typically securities of other entities, such as stocks, bonds, and index funds.
The investment company also provides periodic financial information to investors. This information reflects the change in the fair value of the investments the company holds. This may be expressed in the form of a Net Asset Value per share. The NAV is determined by dividing the number of outstanding shares by the net assets attributable to the shares.
Some investment companies, such as those in the investment management industry, offer hundreds of products. These may include exchange-traded funds, money market funds, and index funds. These investment vehicles vary in terms of the investments they hold and the risks they are willing to take. Investment companies charge operational costs and management fees for these services.