U.S. pooled-investment entity that issues securities and invests primarily in securities, including open-end funds, closed-end funds, and unit investment trusts.
An investment company is a pooled-investment entity that issues its own securities and invests the money it raises primarily in securities. In the United States, the three basic types are open-end funds, closed-end funds, and unit investment trusts (UITs).
The term describes a legal and operating structure, not an investment strategy. An equity fund, bond fund, and balanced fund can all be investment companies even though they own different assets and pursue different objectives.
| Structure | How investors usually obtain or sell shares | Portfolio management | Main pricing point |
|---|---|---|---|
| Open-End Fund | The fund continuously issues and redeems shares; most ETFs are a special exchange-traded form. | Usually ongoing. | Traditional mutual funds transact at the next calculated NAV; ETFs trade at market prices. |
| Closed-End Fund | The fund generally sells a set number of shares, and publicly traded shares later change hands in the market. | Usually ongoing. | Market price may be above or below NAV. |
| Unit Investment Trust | The trust makes a one-time offering of a fixed number of redeemable units. | Generally fixed rather than actively managed. | Redemption value is tied to NAV, subject to the trust’s terms and charges. |
These categories describe structure. A label such as “growth fund” or “income fund” describes what the portfolio is trying to do.
The investment company holds the portfolio for its shareholders. The investment adviser is the firm paid to select or oversee investments and provide portfolio-management services.
This distinction matters when reading disclosures. The fund has assets, liabilities, shares, and an investment objective. The adviser has an advisory contract, personnel, fees, and possible conflicts that the fund’s governance process must oversee.
Not every entity that owns investments is an investment company under U.S. law. An operating business may hold securities without being primarily an investment vehicle. Certain private funds structure themselves to qualify for exclusions from the statutory definition, including Section 3(c)(7).
The word “fund” also does not establish legal status by itself. Pension funds, private funds, bank collective funds, and foreign pooled vehicles may operate under different legal frameworks.
Suppose two funds each own a portfolio with a net asset value of $20 per share.
The assets can be similar while the investor’s transaction price and exit mechanism differ.
Check the prospectus and shareholder reports for:
Do not infer these features from a ticker symbol or marketing name alone.
Investment-company regulation creates a framework for disclosure and operations; it does not eliminate loss. Investors still face the risks of the underlying assets, management decisions, fees, valuation methods, leverage, and the way shares are bought or sold.
This page provides general financial education, not personalized investment, tax, or legal advice. Legal classifications can depend on the facts, governing documents, and jurisdiction.