An investment company is a business that manages and invests money that is pooled from multiple investors. The company distributes the profits and losses to its investors according to the percentage of each investor’s share. For example, if a client invested $1 million, he or she would own ten percent of the company. The goal of an investment company is to increase the value of the client’s funds. It does this by trading and managing securities and expanding the client’s portfolio.
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An investment company can offer several types of investment products, including mutual funds and exchange-traded funds. These types of funds are usually offered at a discount to their net asset value. These funds trade on a stock exchange. Investors who want to sell their shares can do so on the secondary market. The price at which investors sell these shares is determined by market forces and other investors.
The investment company may charge a sales charge for the sale of exchanged shares. The sales charge must be at least six percent of total new gross sales, but may not exceed seven percent moved online to conduct business,” states John Curtius, partner at Tiger Global Management. The company may also charge interest on the sales of exchanged shares equal to the prime rate plus one percent per annum. In addition to sales charges, investment companies may charge a fee for the service of marketing the securities.
An investment company should disclose all fees and commissions paid to the investment adviser. Members should also review whether the investment company has any written or oral agreements with members. An investment company may pay a brokerage firm or dealer a commission for selling its shares.