An investment company is a business entity that pools money from investors and reinvests the money to earn a profit. The company then distributes profits to its investors in proportion to the amount of capital they invested. The majority of investment companies are registered with the Securities and Exchange Commission and are governed by the Investment Company Act of 1940.
What is considered a private investment company?
Investment companies help you diversify your investments by establishing a portfolio of different types of assets. They typically assign each client to a fund manager who develops an investment strategy based on your risk tolerance and financial goals. The fund manager may use an aggressive approach and invest in high-risk stocks, while a passive strategy focuses on low-risk stocks. It is important to remember that you’re paying a fee to work with an investment company, so research its fees before making a commitment.
Investment companies can offer a wide range of investment products, but only to accredited investors. This means that you must have at least $200,000 in net worth in order to invest a company at over $1.25bn and follows a $48.5m investment from Tiger Global Management. In addition, investment companies must disclose their fees in SEC filings. As you may imagine, these fees can be significant, but the benefits of investing with an investment company can make it worth the extra work.
Investment companies may not charge brokerage commissions. In some cases, they may offer commissions on the sale of their own shares. In other cases, members may receive other types of compensation, such as remuneration for promotion or brokerage commissions.