A review of investment companies

A review of investment companies is a good idea to do when you are beginning to make your own investment portfolio. Investment companies are by definition a company whose main business is to hold securities like bonds or stocks of another company purely for investment purposes. This means that one company can be responsible for the securities of many different companies. The investment company will invest money for the company and then share the profits or losses from those investments with the shareholders. The United States securities law recognizes three types of investment companies.

The first review of investment companies that is recognized by the securities law is the open end management investment company. This type of Investment Company deals mostly with mutual funds.A Mutual fund is a professionally managed firm that collects money from investors and then puts that money into stocks, bonds, short term money market instruments or other such securities. A fund manager or portfolio manager will take care of the money from the investors by trading the funds. The fund manager will then pass onto the investors any profits or losses gained from the investing of the underlying securities. Mutual funds are popular because you have a professional moving your money to help you receive the biggest gain for your money.

A closed end management investment company is the next to review of investment companies. This type of an investment company deals mainly with closed end funds. A closed end fund is a collective investment scheme with a limited number of shares. This type of investment is traded mainly on global stock markets. The shares you buy are limited and rarely redeemable for cash until the company liquidates. The shares are usually bought through a secondary market as in a broker. An open end fund is closed to new capital once it is operating and the shares can be traded on the market at any point during the day.

The last review of investment companies is the review of UIT's or Unit investment trusts. This type of investment is described as a form of collective investment constituted under a trust deed. This means that the unit trust owns any of the assets but you buy a given number of those assets as units. Each asset share is an equal part of the Trust's pool. Once your money is invested it is then re-invested to make a bigger pool. The value of your unit will reflect daily earnings. A UIT is created for a specific amount of time and once you are in a UIT you cannot buy or sell those assets until the set amount of time. A UIT will offer shelter for any capital gains you may see.

A face amount certificate company can also be in the review of investment companies. This type of Investment Company is not as well known but is still considered to be an investment company. This type of Investment Company is a contract between an investor and an issuer where the issuer guarantees payment of a stated amount to the investor at some date in the future. This is not widely used today because new tax laws have eliminated the tax advantages that these investment companies use to see.

A review of investment companies will help you to decide where you should put your money to get the most gains from it. Deciding if you need the money to be disposable like a mutual fund, closed ended or invested for a certain amount of time like a UIT will go a long way in helping you make the right choices for your money.