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Investment Intermediaries

STRATMAN

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Karyl Garcia
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13 views2 pages

Investment Intermediaries

STRATMAN

Uploaded by

Karyl Garcia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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INVESTMENT INTERMEDIARIES

Mutual Funds. These financial intermediaries allow savers to purchase shares in


portfolio of financial assets, including stocks, bonds, mortgages, and money market
securities. Mutual funds offer savers the advantage of reducing transactions costs.
Rather than buy many stocks, bonds, or other financial assets individually each with
its own transactions cost - a saver can buy a proportional share of these assets by
buying into the fund with one purchase. Mutual funds provide risk-sharing benefits
by offering a diversified portfolio of assets and liquidity benefits because savers can
easily sell the shares. Moreover, the company managing the fund - for example, BPI
Mutual Funds, specializes in gathering information about different investments.
Types of mutual funds
 Closed-end mutual funds
 Open-ended mutual funds
Types of mutual funds
 Closed-end mutual funds
This mutual fund issues a fixed number of nonredeemable shares, which investors
may then rode in over-the counter markets just as stocks are traded. The price of a
share fluctuates with the market value of the assets - often called the net asset
value (NAV) in the fund.
 Open-ended mutual funds
This mutual fund issues share that investors can redeem each day after the markets
close for a price tied to the NAV. Many mutual funds are called no-load funds
because they do not charge buyers a commission, or "load." Mutual fund companies
earn income on no-load funds by charging a management fee typically about 0.5%
of the value of the fund's assets for running the fund. The alternative, called load
funds, charge buyers a commission to both buy and sell shares.
Hedge Funds. Hedge funds are financial firms organized as a partnership of
wealthy investors that make relatively high risk, speculative investments. Hedge
funds are similar to mutual funds in that they accept money from investors and use
the funds to buy a portfolio of assets. However, a hedge fund typically has no more
than 99 investors, all of whom are wealthy individuals or institutions such as
pension funds. Hedge funds usually make riskier investments than do mutual funds,
and they charge investors much higher fees.
Finance Companies. Finance companies are nonbank financial intermediaries that
raise funds through sales of commercial paper and other securities and use the
funds to make small loans to households and firms. Finance companies raise funds
by selling commercial paper (a short-term debt investment) and by issuing stocks
and bonds. They lend these funds to consumers, who make purchases of such items
as cars, furniture and home improvements, and to small business. Some finance
companies are organized by a parent corporation to help sell its product.

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