Generally, an investment company is a business that issues and invests in securities. An investment company invests funds it receives from client investors on a collective basis, and each investor shares their proportion of the resulting profits and losses.
Federal securities laws categorize investment companies into three basic types: mutual funds, closed-end funds, and unit investment trusts (UITs). Each type of investment company has its own unique features and legal obligations. For example, mutual fund and UIT shares are "redeemable," which means that investors who wish to sell their shares sell them back to the fund or trust at their approximate value. Closed-end fund shares, on the other hand, are usually not redeemable, but rather, when closed-end fund investors want to sell their shares, they sell them to outside buyers on the secondary market at a price determined by market conditions. Additionally, there are a number of variations to each basic type of investment company, such as stock funds, bond funds, money market funds, index funds, interval funds, and exchange-traded funds (ETFs).