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Simple English definitions for legal terms
diversified investment company
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A quick definition of diversified investment company:
A diversified investment company is a type of business that invests money from different sources into a variety of assets. By law, they must invest at least 75% of their assets and cannot invest more than 5% in any one company or hold more than 10% of the voting shares in any one company. This means they spread their investments out to reduce risk.A more thorough explanation:
A diversified investment company is a type of investment company that is required by law to invest at least 75% of its assets in securities, but cannot invest more than 5% of its assets in any one company or hold more than 10% of the voting shares in any one company.
- A mutual fund that invests in a variety of stocks, bonds, and other securities to reduce risk and increase returns is an example of a diversified investment company.
- A holding company that controls several unrelated companies or businesses is not a diversified investment company because it does not primarily invest in securities.
The examples illustrate that a diversified investment company is a type of investment company that invests in a variety of securities to reduce risk and increase returns. It is required by law to diversify its investments and cannot invest too much in any one company to prevent overexposure to risk.