What is an Investment Company (ASC 946)?


Sam A. works hard. He has a good job at the local bottling plant. He is frugal with his spending and as a result, has been able to save quite a bit of money. Sam wants to do something with his money. He wants to invest, but how? What type of investments should he buy? Stocks? Bonds? What stock? Just one? Many? How does he access the market? How much should he invest? What does he need to manage his investments? What if he makes a bad investment and loses his money? Is there another way? Yes! An investment company or fund just might be the answer! An investment company provides a vehicle for multiple investors to invest. it pulls the investors funds and collectively invests them in assets based on a specific management, objective, or strategy. This pooling of funds provides the investors with professional investment management, as well as opportunities for diversification and access to investments that may otherwise not be accessible to a smaller individual investor. The portfolio of assets held by the investment company provides a return through interest, dividends, and/or capital appreciation. That return is then allocated to the investors based on the proportion of their ownership in the investment company.

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