Investment Companies — An Overview
Investment companies exist to invest other people’s money. That may seem obvious but essentially that’s it. They’re there to make a single investment from you become part of a larger investment portfolio. Like mutual funds they’re a sort of collective investment. They help you spread your risk and access opportunities you couldn’t do alone with a small amount of money.
The Benefits of Investment Companies
When you invest with investment companies you’re buying shares in a portfolio monitored by an investment manager. The company decides what to do with the money in the fund. It buys and sells shares property and other things. The benefits to you of investment companies are:
– you can access types of investments you wouldn’t be able to on your own.
– you have the expertise of a fund manager.
– you can choose companies that invest in certain markets or industries.
Investment companies have existed for over fifty years with some of the early ones still going strong. They include
– investment trusts.
– offshore investment companies.
– Venture Capital Trusts. These invest in small companies. They can be high risk but offer big returns.
– split capital investment companies. These offer two or more kinds of share.
How To Choose Investment Companies
You need to decide what kind of investment you want to make before you can choose a company. What do you want your investment to give you, and when? Do you want to invest in a certain sector? How much are you willing to risk? How long do you want your investment to be running for?
Talking to a financial advisor can help you decide if investment companies are the best approach for you. If you’re already sure investment companies sound like what you want, though, there are plenty of ways to compare companies online. The AIC offers an excellent comparison engine that lets you put in your personal factors and see the most relevant results. Big online companies like Octopus can also help you put your money in the right kind of collective fund for you.
Areas for Investment
How you choose your investment company might also depend on the current financial market. If you know the property market is about to make an upturn, the investment company will know this too. It’s worth checking which companies specialise in investing in property. On the other hand, if there’s something else moving up in the world, small businesses that are in with a good chance of growing, this is where you can check out an investment company that invests in these slightly higher risk areas. This all depends on the kind of portfolio you want to set up. But when you are first starting out, investment companies are certainly a good way to help make your portfolio more diverse with a small amount of money.
Investment companies are a good first venture, but there are some important don’ts.
Don’t invest more than you can afford.
Don’t put all your eggs in one basket — diversify!
Don’t assume current trends will continue.
Don’t take the first opportunity you see without comparing it to others.
And don’t take risks if you can’t afford to lose!
Investment companies can be an excellent low-risk option — but make sure you pick the right one for your circumstances.