What are investment companies?
The benefits
Investment companies being collective investment funds have several benefits for investors. This section will tell you how they:
- Allow you to pool your money
- Allow you to spread your risk
- Use professional managers' expertise
- Allow you to invest small amounts
Allow you to pool your money
When you purchase shares in an investment company you pool your money with all the other investors' money, providing potential economies of scale, in terms of dealing costs and administration.
Allow you to spread your risk
Each investment company owns shares in a range of investments, so buying shares in only one investment company effectively gives you a diversified portfolio. As you're not dependent on the success of just one or two investments, this spreads your risk.
Use professional managers' expertise
Each investment company uses professional management expertise.
Allow you to invest small amounts
You can invest small lump sum amounts or even invest monthly. Most companies are available through savings schemes run by their managers, some of which start from as little as £30 a month.
Put all these benefits together and you have an effective and efficient vehicle for investing and gaining exposure to a diversified portfolio.
How they work
