What is an Investment Company?

 What is an Investment Company?


Investment Companies

An investment company is a company that has a number of specialized share investments  Was ist eine Holding?  that you can participate in. The advantages of this are that you are using the expertise of professionals who are in the market everyday and rely on getting the best results for their company.

Technical Terms

The companies that do specialized investing on your behalf are called LIC; Listed Investment Companies. The name implies that they are listed on the ASX and that they invest and their structure is as a company. The manager of the company may be internal or part of a organization that offers expertise to several such companies. I prefer internal managers as they perform a much more hands-on approach to managing.

Investors in an LIC, invest through the share market and invest by selling and buying shares in the company to each other. They are traded as all shares are traded. There is another way to invest in these companies and that is to buy units in the company. Buying the units means that you have exposure to the companies’ performance. Unit trusts are offered by the company and investors may choose to buy units in the trust offered. There may be taxation benefits that should be looked into before you decide to buy units or to purchase the shares.

Investing with an LIC will be a consideration to investors for the following reasons

1) A diversified portfolio through a single investment.

Investors get access to and exposure to a wide ranging group of shares without having to pay entry and exit fees on all the shares. Only one set of fees apply on the shares and that is for buying into the LIC and selling out of the LIC. However, the overall fees for internal managed investments can be a significant factor in your choice of which LIC to invest



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