Question

1. What is an investment company? Discuss the basic characteristics (e.g. investors, assets, strategies) for one type of such a company.

Answer 1

In simple words, an Investment company takes money from the investors. The company makes strategy as per the investor's risk appetite and investment objective. Fund Manager/Analyst identifies security where it should invest and invest the money.

Mutual Fund is such type of company.

Mutual Fund has investor. There are several mutual fund that are made as per the risk profile and investment objective of the investor.

Mutual Fund is actually a Trust which has Trustee.

Analyst do research and identifies the potential security which can give good return in future.

Sponsor gives the fund to start the business.

Custodian guarantees the safeguarding of the asset for mutual fund.

So, these way mutual fund is formed and operates.