Generally, an "investment company" is a company (corporation, business trust, partnership, or Limited Liability Company) that issues securities and is primarily engage in the business of investing securities.

They are financial intermediaries that earn fees to pool and invest investors’ funds, giving the investors right to a proportional share of the pooled fund performance. The performance of the investment company will be based on (but it won’t be identical to) the performance of the securities and other assets that the investment company owns.

Investment companies are classified two types: managed and unmanaged companies.

 Unmanaged investment companies (unit investment trusts in the United States) hold a fixed portfolio of investments (often tax-exempt) for the life of the company and usually stand ready to redeem the investor’s shares at market value

Unit investment trusts (UITs) are registered investment companies, but they operate under more constraints because they do not have a manager per se (but trustees). UITs are required to be fully invested in all underlying securities forming the index and must hold dividends received on securities in cash until they pays a dividend to shareholders. This could result in a slight cash drag on performance.

 Managed investment companies are classified according to whether or not they stand ready to redeem investor shares

+ Closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange, also known as a "closed-end investment" or "closed-end mutual fund". Despite the name similarities, a closed-end fund has little in common with a conventional mutual fund, which is technically known as an open-end fund.

The former raises a prescribed amount of capital only once through an IPO by issuing a fixed number of shares, which are purchased by investors in the closed-end fund as stock. Unlike regular stocks, closed-end fund stock represents an interest in a specialized portfolio of securities that is actively managed by an investment advisor and which typically concentrates on a specific industry, geographic market, or sector. The stock prices of a closed-end fund fluctuate according to market forces (supply and demand) as well as the changing values of the securities in the fund's holdings.

+ An open-end fund is a type of investment companies (mutual funds) that does not have restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish to sell with the price equal to NAV (net asset value)

The majority of mutual funds are open-end. By continuously selling and buying back fund shares, these funds provide investors with a very useful and convenient investing vehicle.

It should be noted that when a fund's investment manager(s) determine that a fund's total assets have become too large to effectively execute its stated objective, the fund will be closed to new investors and in extreme cases, be closed to new investment by existing fund investors.