Answer to Question #182829 in Economics for Awande

Question

Identify and describe an appropriate investment objective and a set of investment constraints for the Maphosa foundation

Answer 1

Investment companies and funds are organizations that collectively invest in securities. They issue and sell their own securities mainly to small individual investors, use the proceeds to buy securities of enterprises and banks, and provide their investors with income on shares.

  In fact, they manage the funds of their shareholders, which is why they are sometimes called investment trusts. Investment companies and funds play an important role in the investment process, as they concentrate significant funds of small investors, usually directed to the development of production. The investment fund issues shares in order to mobilize investors' funds and invest them on behalf of the fund in securities, as well as in deposit accounts. The investment fund has no right to engage in other types of activities. Investment companies and funds, by issuing their own shares, raise funds, which are then invested in securities of industrial and other enterprises. In other words, by purchasing securities, they finance various sectors of the economy. An investment fund attracts funds from many small investors, pooling them and investing on its own behalf in large blocks of shares. Consequently, an investment fund is a large investor, unlike an investment company, which acts primarily as a financial intermediary between issuers and investors in the initial offering of securities. Investment funds have certain targets in the implementation of investment activities and in accordance with this build their strategy. The main activity of an investment fund is the issue of shares, their sale, and the investment of the mobilized funds in other income-generating securities. Thus, the purpose of the investment fund is to ensure the profitability of investments and the increase in invested funds.