In this article, you are going to learn about investment companies and find out what they are and why they are needed. Find out about the principles of operation, functions, and classification of private investment firms.
Investments are becoming increasingly popular among individuals. People can use these investments to save and increase their savings.
So what is an investment company?
Surely many have heard of one simple rule: money should not lie dead weight. To do this, you need to invest in various investment products. But investing on your own is troublesome and risky. This requires certain knowledge and experience. If the prospect of investing personally terrifies you, it is better to entrust the management of capital to specialists, namely companies for investment.
Principles of operation
Investment companies are usually engaged in the issue and sale of their own securities, and with the proceeds, they acquire securities of various enterprises and banks. Due to this, customers receive income. This is the management of funds, in simple terms. In order for depositors to receive a stable profit, their funds are pooled and invested in various projects. Profit is generated not only through the pooling of funds but also in connection with the competent actions of the financial manager.
- Transactions for the purchase and sale of securities;
- Capital allocation operations in different directions to reduce risks.
Investment companies (or IC) services are available to various investors: both large and small. And the income that the depositor will receive depends on a successful or unsuccessful investment of funds. The companies themselves receive commissions from profits and percent for managing deposits. ICS is interested in carrying out a large number of successful operations.
The classification that has received the greatest distribution implies the division of IC into open and closed. ICS related to closed ones are engaged in the issue of shares in a limited way, unlike open ones. Private investors are not able to cooperate with closed ICS. These companies do not provide trust management services. Open ICS, on the contrary, cooperate with private investors.
Choosing an investment company: recommendations of specialists
To save and increase capital, you need to take a responsible approach to choose an investment company. Let’s figure out how to approach the choice of IC correctly not to lose your savings:
- Recommendation 1. Study all publicly available documentation.
If they are in the public domain, we are talking about the honesty and openness of the IC. It is quite possible to check whether the documents are authentic on the websites of various government agencies.
- Recommendation 2. Carefully study the official website of the company.
Even just by viewing the main page, you can make an approximate conclusion about the activities of the IC. If the design of the site is concise, and neat, there is convenient navigation, and trust in such a company increases. Check who owns the domain. It should be the IC, not the face from the side. The higher the domain lifetime, the better for the client.
- Recommendation 3. Determine the desired type of profit.
There are no investments without a certain degree of risk. Therefore, you need to decide which profit is better to get: fixed or variable. The fixed is stable but small, and the variable brings more money but is associated with high risks. Determine the amount of possible profit.
- Recommendation 4. Analyze how many options the company offers for investing and withdrawing money.
If there are many of them, (for example by means of electronic payment systems, through a bank account, withdrawal to a credit card) the company is solid.
- Recommendation 5. Pay attention to how many investors the company has.
Everything is simple here: the more of them, the more reliable the company is. If there are few investors, the company either operates recently or is not trusted. And if others do not have trust, then you try to choose a more reliable option.