An investment firm is an
organization (limited liability firm, business concern, partnership or
corporation) that issues investment securities and is mainly engaged in the
dealing of investment securities. The performance of an investment firm depends
on the performance of the assets and other securities that it owns.
In general, an investment firm is
termed as a financial institution, which sells stocks and shares to individuals
and invests currency in securities of other companies. By putting money in aid
of their shareholders, an investment firm is liable to their gains and losses.
Investment firms are also termed as Investment Companies and are very much
correlated to the Investment Bank concepts.
Investment Banks assist
government and private bureaus in respect of raising money through issue of
securities and selling them into the capital market. They also assist the
private and public financial corporations in arranging funds from the primary
market with the assistance of both debts and equities. In addition, they offer
valuable guidance and tips in acquisitions and merger of firms and other
financial dealings.
U.S. securities of SEC
(Securities and Exchange Commission) law classify three different kinds of
investment firms namely Mutual Funds, UIT (Unit Investment Trusts) and
Closed-End Investment Company.
Kinds of Investment Firms – In Brief:
Mutual fund companies focus on
mutual funds that are collective pool of assets. They bring huge money from
investors and invest in share-market, bonds, equities, money market securities
and instruments. There are different categories of mutual funds available for
investors such as equity funds, money-market funds, hedge funds and open-end
funds. Mutual fund companies are the kind of investment firms where financial
manager trades in the firm’s primary securities, actual investment profits,
bonus and corresponding losses.
Unlike a mutual fund company, the
Unit Investment Trusts is a United States investment firm, which has fixed
security portfolios. These portfolios are made for some specific period. A Unit
Investment Trust (UIT) does not have an investment adviser, corporate officer
or board of directors, to offer advice or guidelines during the lifespan of the
trust.
A closed-end fund implies
collective pool of assets but with limited number of stocks or shares that
cannot be generated until the funds liquidate.
Overview:
Each kind of investment firm has
its own distinctive features. For instance, UIT and mutual fund shares are
exchangeable. Meaning, while investors desire to sell their shares, they can
easily sell them back to the Trust or Fund Company or to brokers acting on
behalf of Trust or Fund Company at the approximate Net Asset Value. On the
contrary, close-end fund shares are not exchangeable. Thus, those investors who
want to sell shares can sell them to the secondary market investors at a predetermined
price by the market. Moreover, there are differences within each kind of
investment firms in terms of exchange-traded funds, bond funds, stock funds,
money market funds, interval funds and index funds. Investment firms such as
Merrill Lynch, ING Investments and JP Morgan are some of the renowned
investments firms all round the world.
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