investment company

Investment Company

A corporation or trust engaged in the business of investing the pooled capital of shareholders in the financial instruments of other companies. This is most often done either through a closed-end fund or an open-end fund (also referred to as a "mutual fund"). In the U.S., most investment companies are registered with and regulated by the Securities & Exchange Commission under the Investment Company Act of 1940.

Notes:

Individual investors in an investment company can achieve a high level of diversification with minimal effort and cost, since the funds from all investors in the fund are pooled together for the investment company to make investments. Investment companies make a profit by charging fees to investors wishing to buy shares in the company and by affixing a percentage claim on the company's returns.

See also: Closed-End Investment, Diversification, Hedge Fund, Investment Company Act of 1940, Mutual Fund, Net Asset Value - NAV, Open-End Fund, Securities & Exchange Commission - SEC

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Investment company

A firm that that invests the funds of investors in securities appropriate for their stated investment objectives in return for a management fee. See also: Mutual fund.

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investment company

A firm in which investors pool their funds to allow for diversification and professional management. Because individual firms often specialize in particular types of investments, the potential returns and risks vary considerably among firms. Charges to investorsboth to acquire shares in a firm and to pay management for operating the companyvary significantly from investment company to investment company. Also called management company. See also closed-end investment company, conduit theory, management fee, mutual fund, performance fee, regulated investment company.