Private Investment Companies
A private investment company is any company that is in the business of issuing securities; and is also involved in the business of investing in securities.
Private investment companies invest funds from various individuals and other entities (like small businesses or non-profit groups that invest money in securities).
The individual investors (including collectives) take a share in the profits or losses realized by the private investment company that handles investments on their behalf.
Various private investment companies own different types of securities; so if you are planning to invest with a private company, be sure that you know what kind of investments your money will be going toward.
The financial performance of the private investment company that you choose is directly related to the gains that you will see – and these are, of course, both tied directly to the securities held by the private investment company that handles your financial assets.
Categorizing Private Investment Companies
Federal law places these companies into three specific categories. If you are in the process of choosing a private investment company, be sure that you understand what type of investment company will serve you best.
Mutual Funds – A mutual fund is an investment company that pools funds invested into various securities such as stocks, bonds, and money markets. It is called an Open-End Company. There are many types of Mutual Funds:
Index Funds – Aim to achieve the same return as a specific index (such as S&P 500)
Stock Funds -Invest primarily in stock or equity
Bond Funds-Also called an income fund. These funds invest primarily in debt securities and bonds.
Money Market Funds – These mutual funds specialize in low risk securities like government securities and commercial paper.
Closed – End Funds – Closed end funds do not offer their shares on a continuous basis like mutual funds normally do. Instead, they offer a certain number of shares which are typically managed by an Investment Advisor who is registered with the Securities and Exchange Commission.
Unit Investment Trusts – Also known as “UIT”, a Unit Investment Trust tends to issue redeemable securities in the same way the a mutual fund does. UIT’s have some specific characteristics:
UIT’s usually, make a one-time public offering in the same way that Closed End Funds do. They are normally bought and sold at fixed numbers of units.
UIT’s have a termination date like bonds do – once the termination date is reached, the UIT is terminated and the portfolio shares are sold. The proceeds are then distributed to the UIT’s investors.
Private investment companies of all kinds can help you to make the most of the money you have available for investing. Whether you have just a little money to work with, or a very large amount, a private investment company will be able to give you guidance and even more important, show you the way to prosperity for life.