InvestorQ : As LIC owns shares of many companies & if I invest in LIC IPO, it will be a mutual fund investment for me?
Sneha Balasubramanian made post
IPO

As LIC owns shares of many companies & if I invest in LIC IPO, it will be a mutual fund investment for me?

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Manish Mehta answered.
3 months ago
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Investment in mutual fund means when a fund house pool resources from various investors and invest the money so raised into securities of various companies to bring in the maximum benefit to the investor. They share the gain so received on these securities, as well as the losses so incurred with the investors. Mutual fund houses charge a fixed fee for providing these services and sometimes share the profit of the investors as well.

However, when you invest in the securities of a company, you become a stakeholder of that company and it is different from mutual fund investment. The company distributes profits to the stakeholders in the form of a dividend, which could be any percentage as the company decides. This dividend is distributed after deducting all expenses associated with the company and considering all income.

When a company invests in securities of another company, it is considered as an investment in the books of that company, and any income arising thereon is considered as income arising to the company and is distributed among the stakeholders along with other business profits. 

The purpose of mutual fund houses is to invest in securities of various companies, whereas, the purpose of a company is to run the business and provide stakeholders with the profit.

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