Before you compare investment companies, you should know that these are among the largest investors in the national financial market where they contribute major portions of U.S. issued stock shares, bonds, and securities. This means that investment companies have been playing a crucial role in short-term financing, as well as making sure that the securities are properly invested. When you compare investment companies, you must know what kind of service you are expecting in return. For this, you will need to know your financial goals, check the history of the investment company of your choice, and set the type of business relationship you want to establish with the investment firm.
Making the Smart Investment Choice
Remember that one of the motivating factors in making that smart investment is your financial goal. How much would you want to earn from the investment? There are many investment firms that promise you great returns to increase your wealth. Making an investment always come with a risk, as with any other type of business. You must learn how you can minimize loss and maximize profit. Also, keep in mind that the higher the promise of earnings will be, the greater the risk, and never enter into a business that you don’t fully know.
What are the Five Types of Investment Companies:
- Management Investment Company – the most common type where companies manage various portfolios of securities. This can be classified into two types: Open-End and Closed-End. In an open-end investment firm, new shares may be bought and sold in forms of mutual funds. In a closed-end investment firm, shares are sold in one-time public sale.
- Unit Investment Trusts or UIT – is an investment company where a trustee manages the investment portfolio and where a number of shares are predetermined for sale to shareholders.
- Exchange Traded Funds or ETF – is an investment company which shares the function of either an open-end investment company or UIT. Returns are aimed to reach a certain market index.
- Face Amount Certificates – is where an investment company issues debt certificates at fixed interest rates. Though this is a rare type, shareholders may convert their investment into cash before maturity date. Investors can pay in lump sum or installments.
- Hedge Funds – is not subject to certain regulations that normally protect the investors of the mutual funds. These are mostly private investments that are unregistered.