Investment Companies Comparison

Scholasticus K Oct 24, 2018
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Investment companies are quite difficult to compare, it's too difficult to decide which one is better or which one is the best. However, if you plan to take the aid of investment companies, then the following guidelines would help you out in comparing them and finalizing the one that suits you the best.
Investment companies are broadly defined to be companies which are engaged in creating securities and accepting deposits from their clients, in order to invest the accepted finances into sources with an objective of obtaining the highest possible return on investments or profits. Profits is then shared with the investors.
So simply, speaking, an investment company is chiefly an organization that conducts the given functions:
  • The company receives money from its investors upon which it invests the same into several channels which include stocks, money market and banking instruments, real estate, credit, debts and even bullion markets.
  • A collection of such investment channel is called a portfolio, managed by an experienced investment expert referred to as a 'manager' or 'fund' manager'. These mangers are highly skilled in investing and the investment channels hat they usually opt for, generate a substantial level of return on investment. The profits are then shared with the investors.
  • To give, their investors assurance and programs, investment companies create funds, trusts and schemes, where a specified investment amount and returns are contractually and legally promised, thereby increasing the security of investments in the company.
There are also some investment companies which tend to hand out only stock to their investors. The dividends on these stocks and the market price or the net asset worth of this stock amount is huge. The dividend of these stocks tends to act as a way of distributing the profits among investors.
Conventionally, an investment company issues instruments such as mutual funds, closed-ended funds and unit investment trusts and some others which are approved by the United States Securities and Exchange Board Commission.

Factors to Consider While Comparing Investment Companies

So, how to decide if a said company would be a good bet to invest money? Here are some effective tips and tricks of the trade which would help you to compare the investment companies in which you plan to invest your finances.

1. Company's History and Fund Mangers

One of the primary and often ignored factor is the company's history and the reputation of the company. For this you may go through the company's website and reviews about the company's fund managers. For this you can easily find effective resources on the Internet.
Several times, the companies and some of the review websites project the return on investments of net asset values of the funds of the companies, in the form of graphs. Simply, too many downfalls in the graph indicates that the fund is not performing well. It is best of avoid such companies.

2. Instruments and Products

As mentioned, there are several products, instruments and securities which are offered by investment companies. Now a primary way of getting to know which company is the better one for you, you can make a comparison of two parallel financial products of the company, and look for the one that suits you the best.
The best way to do so is to check how much total investment you have to make in the product and how much total amount you will receive back. Calculate the difference between the two and convert the same into percentage, in order to know how much percentage you have received as the return.
The percentage is the rate of the return and more the rate of return the better is the company. The formula goes as:

Returns received = Total amount received as return (-) Total amount invested

3. Portfolio

The portfolios of the company often tend to depict the stability of a certain fund and the company itself. In such a case, it is more appropriate to look at the portfolio or rather where and in which sectors is the money being invested. A versatile and well-distributed sector is of course the best option.
However, if you are aiming to profit from one specified industry, then there are certain investment companies which tend to focus on specified fields. Now you need to exercise a cautious hand because such funds which concentrate on one specified field in times of the economic ups and down can cause a substantial problem and loss.

4. Security of Returns

Now this brings us to the last part of the comparison as it is based upon comparison of 'fixed' and 'variable' returns. Almost every investment, has two parts, fixed returns and variable returns. There are however, also returns which are also explicitly, fixed, i.e.: they offer only fixed returns.
The variable returns of investments always depend upon the portfolio's and market's performance in that very financial year. The rule of thumb says that as long as the fixed returns help you to recover all your invested amount plus about 6-10% of the invested amount, then the investment is relatively good.
The bright side is that your variable returns can also perform brilliantly when the economy goes into boom.
There are several more parameters that one can consider such as the monthly, quarterly, half-yearly, or yearly investment payments which you would need to make. The reputation of the firm, ratings by business houses, media, credit and equity rating agencies, is also something that you can consider to finalize the top rated investment firms.
The specifications, terms and conditions and number of years of the investment instrument are some of the other conditions which you can consider for your investment companies comparison.