What Is An Open Ended Investment Company?

We all want to invest our money wisely and we want to get good returns from whatever investment vehicle we choose.

Part of the task we have is to make sure we fully understand the investment we are making and there are lots of different ones around that may be new to us.

One good example is an open ended investment company. These are worth looking into if you have an interest in the stock market and you want to follow up on that interest. The stock market is a complex place if you aren’t used to it, and an open ended investment company could be what you need to help you take that first crucial step.

This kind of investment is very similar to a unit trust as well, so you might see the two mentioned together. They are both referred to as ‘open ended’. This means there are no restrictions on the size of the investment, which comes from lots of different investors. There are differences though and it is important to understand what they are.

One key point to remember is that unit trusts are made up of units, hence the name. As far as open ended investment companies are concerned, you are investing in actual shares. This is true even though they are both concerned with the stock market.

You should also be aware that prices for both of these investment vehicles are worked out every day. Whereas a unit trust has both buy and ask prices, an open ended investment company will have just the one price. You might see this referred to as the single price, and it is the only relevant price you need to worry about.

Of course an investment of this nature is not the safest one you will ever come across. While they often provide good returns, there is never any guarantee that you will make a profit. Indeed, you could lose some or all of your money. This is not meant to scare you, but it is a fact and one that you should bear in mind if you are seriously considering investing in an open ended investment company.

Furthermore as is often the case with the stock market and related investments, this kind of investment should not be viewed as a short term venture. You need to be happy to sink the required amount of money into an OEIC, as they are also known, for several years.

This tactic means that any short term losses will hopefully be ironed out and made back again. The stock market does typically improve in this way over the long term, which is why an open ended investment company is worth considering as part of your overall investment strategy.