Investment companies are engaged in multiplying their own and other people's financial assets by investing in any projects. This is a relatively new concept for the domestic securities market, but the experience of foreign investors shows that this type of activity is beneficial to all participants.
Types of investment companies
Often, all investment companies are divided into two types: closed and open.
Private investors cannot collaborate with closed organizations. Such companies consider only their own or borrowed (bank loans) finances as a tool. In other words, the activities of closed joint-stock companies do not provide for trust management.
Open organizations, on the contrary, work with the money of private investors, taking them into trust. This means that the owner of the capital can entrust his money to an investment company so that it invests them in some project, and then returns it with a profit.
Investment companies are the best choice for cautious and patient investors, as their activities are not characterized by high rates of profitability, but are characterized by a relatively low level of risk.
How investment companies work
To attract capital from the side, investment companies sell their own shares on the securities market. They spend the collected amount on the purchase of shares, bonds and other financial instruments belonging to various enterprises and banks. Thus, receiving income from these securities, the financial and investment company can return to its depositors the amount they invested with dividends. In fact, the organization is managing the funds of its customers.
A feature of the activities of investment companies can be called the fact that they never invest all the money in the shares of one or two enterprises. As a rule, there are much more investment objects. This technique acts as a certain insurance for all participants in the process, since the loss from the fall in the price of one type of securities can be blocked by the profit received from the increase in the value of others.
Investment companies and funds offering mutual participation to investors differ only conditionally. Often they are distinguished based on the size of the organization and the amount of capital that it disposes of.
Investment activities of the company: where they invest money
Having entrusted his "blood" to the managing organization, the investor may not have to worry about whether the prices of those shares in which his finances were raised or fell. This is done by specialists working in an investment company. Their responsibilities include tracking trends in the securities market and making the most profitable transactions that will bring guaranteed profit to the company and its customers.
Some industries are of most interest to investors, for example, construction, insurance, and the production of goods. This is due to the fact that investment companies are organizations whose activities are aimed at making profit with minimal risk, and large companies become reliable objects for long-term cooperation. Securities with low risk and low profitability are considered the best option in order to place free financial assets.
Insurance Investment Company
For many domestic investors, earning with the help of insurance investment companies remains a new and unusual type of activity. Investing in insurance policies is extremely popular in England, which is why this method is sometimes called English. Its essence lies in the purchase of policies or financial portfolios through the mediation of an insurer.
An insurance investment company can act as an object of investment, that is, a depositor buys shares of this particular organization. Or she performs the tasks of a management company that manages other people's money and acquires the securities of other enterprises.
For the investor, the advantage of this method of investing is getting the right to a number of tax benefits.
Features of the investment construction company
Organizations that are engaged in the design and construction of various buildings and other objects and at the same time attract financial resources from the outside are called investment construction companies. Let us dwell on this issue in more detail.
Investment and construction company allows investors to participate in the construction of buildings for various purposes: cottages, high-rise buildings, industrial and commercial facilities. The responsibility of such an organization is to ensure that the construction is carried out legally, in compliance with the necessary rules and regulations (availability of licenses and work permits, coordination and approval of projects).
An investment and construction company is much more attractive to investors than other organizations. Its profitability is quite high, and the risk is relatively small.
Open Investment Companies: Types
Based on the fact that a private investor can only cooperate with an open investment company, he should know about the main types of this structure. There are three types of organizations that are able to manage the financial resources of their customers:
- Really managing customer funds.
- Hiding part of the information about the nature of their activities.
- Not leading any investment activity.
Real trust
A trust management company with real trust is an organization that really cares about the effective management of the money of its investors. The operations they carry out on the market are reliable and can be actually confirmed. It is common practice for such companies to provide customers with reports, monitoring, or the accounts themselves. Investors working with such a company in 90% of cases see exactly the income that was earned using their funds.
Pseudo-Trust Investment Companies
The specificity of such organizations is that they are not interested in real investment, and the profit shown to investors is not reliable.
Their words cannot be verified in any way, and the documents provided as evidence of the operations carried out reflect only a small part of the real picture. Often, such companies sink to falsifying reports, stamenov and other documents. Their main goal is to convince customers of the high efficiency of their activities. A tool for persuasion may be a small number of real documents that confirm their investment activity. For example, they invest about 20% of financial resources in stocks, but the rest remain motionless on the account.
In the vast majority of cases (80%), investors receive money from other investors as a profit.
The financial pyramid: characteristics and main features
The third type of open investment company includes organizations that are completely not involved in the purchase and sale of financial instruments.
Regrettably, today this type of investment organization is the most common. Their employees do not even try to fake reports and monitoring in order to prove to depositors the legitimate nature of their activities. The organizers of some of these companies directly inform their customers that they are inviting them to participate in the financial pyramid. The rest prefer to hide this fact, avoiding direct answers or resorting to outright lies. Stating that their investment companies are not a pyramid scheme, they are not able to provide any convincing evidence.
The profit that they show to investors, 100% consists of funds contributed by other customers.
How to choose an investment company
Thinking about cooperation with organizations in order to protect your finances from the influence of inflation and at the same time earn money, you should carefully consider the choice of company. Experts say that you can get a good profit, even participating in the financial pyramid. But such an activity is considered very risky and requires specific knowledge and skills.
If the investor is interested in a long-term cooperation with the company, he should opt for the first type of company.
Elementary recommendations to filter out obvious unreliable partners include checking the organization’s reputation. Even a superficial study of how long one or another investment company has been working on the market can provide a lot of useful information. Feedback and comments left by customers, as well as the willingness to provide advice will allow a potential investor to form an opinion on the quality of service and service policy of the company.
Profit or calm?
The lower the level of risk that characterizes the activities of an investment company, the less will be the return on investment. In addition, it will take quite a while to wait.
However, this significantly simplifies investment management, which is great for beginner investors. These types of deposits are often chosen by people who do not consider investing as an opportunity to receive basic income. Collaboration with companies characterized by low risk helps to understand the essence of investment and navigate the securities market.
Higher profits promise limited liability companies (LLC). An investment company whose activity is to conduct more risky operations with securities can bring its customers either good, quick profit or loss.
For successful cooperation with such organizations, investors need a set of special knowledge, including about various aspects of the stock market.