How are Investment Funds Regulated?

Most people who have specific long term goals, like retirement, try to achieve it by saving money and investing it for a profit.

One common investment that has gained popularity is an investment fund. Investment funds are a simple and easy way for consumers to diversify their portfolios. With anywhere from $25-$100,000, investors can buy into an investment fund with other like-minded investors. The power of numbers is then used to purchase a fund compromised of a variety of securities and other assets. Although investment funds are not FDIC-protected (thus meaning money can be lost), there are many regulations in place for investment funds.

Laws

Investment funds are regulated by the laws of the Investment Company Act of 1940. There are many steps and procedures in place to help ensure the safety of money in investment funds, and as the bill states the purpose of the regulations are “to mitigate and… eliminate the conditions… which adversely affect the national public interest and the interest of investors.”

Because of the cost and legalities involved with them, establishing a mutual fund is a time-consuming and detail-oriented task. On the other hand, because of how investment funds are regulated, although there are still risks involved for the investors, there is a safety net intact.