Stock Investment companies, also known as listed investment companies (LICs) are slightly different than investment forms or brokerage firms. Brokerage and investment firms are online trading platforms or brick and mortar companies that utilize stockbrokers to execute trades for clients. Stockbrokers are licensed professionals, qualified and certified to give advice about buying and selling stocks, bonds, and mutual funds. Stockbrokers develop long term relationships with their clients and create and implement a financial management plan that meets both long and short term financial goals.
Stock investment companies invest in a portfolio of assets, such as mutual funds, stock shares, private equity stocks and municipal bonds. These companies have shares that can be traded using a stock broker on an exchange. When it sells part of their investment, they pay taxes on the profit and then they pay their investors a dividend.
A value or share price of a stock investment company is determined by the free market. Valuable investment companies make their investors’ money, while less valuable companies may lose their investors’ money. For investors, this means that the shares of stock companies can trade at a premium or at a large discount, depending on the market’s prediction and analysis of future movements.
Brokers and brokerage firms charge their clients steep fees. Stock brokers are paid on commission and the firms may charge investors trade fees, management fees, or account balance transfer fees in addition to the commissions. This makes working through an investment firm expensive. These companies have lower fees than other managed funds. They do, however, charge trade fees. Some of the newer, growth companies may also charge performance fees. Investors should weigh the fees against any potential profits and make decisions accordingly. These fees can take a bite out of any portfolio.
Investment companies do not regularly issue new shares or cancel shares as investors sell or buy shares. Analysts refer to this practice as a “closed end” fund. This closed end strategy allows fund managers and analysts to focus on choosing the best investments and not cash flow. Stock companies are subjected to any stock exchange’s corporate governance and reporting, listing, and filing rules. This makes them legitimate investment opportunities.
Like conventional stocks, these companies are exposed to the overall volatility and movement of the market. Stock companies can be a risky investment, especially in a bull market or a boom period, when investors might be searching for more high profile opportunities. Stock companies are good choices for a bear market, when investors are looking for a safer bet and longer-term investments.
When choosing an stock investment company, investors should follow the same standards and criteria that they do for conventional stocks, bonds, and mutual funds. The stock investment company should have documented and proven management, a five year (preferably longer) track record of solid growth, long term value, and a management structure that welcomes investment. Stock investment companies are a solid and reliable pick for a volatile market.