Introduction investment companies
4 important questions on Introduction investment companies
Why are Investment companies used by investors?
- The main motivation is diversification.
- Idiosyncratic risk can be diversified away.
- Small investors, with little money, would have difficulties to hold the optimal risk portfolio
- Investment companies pool funds of individual investors and invest in a wide range of securities or other assets
What are the services provided by investment companies?
- Record keeping and administration.
- Diversification and divisibility.
- Professional management. Hire specialists/analysts to keep track of the markets.
- Lower transaction costs.
What is the Net Asset Value (NAV) in investment companies?
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What are the 5 types of investment companies?
- Unit Investment Trust
- Closed-end
- Open-end/ mutual funds
- Hedge funds
- Exchange traded funds
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