Professional Investment Objectives Industry and Ethics

Professional Investment-Objectives-Industry and Ethics
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Question one
An investment company is closed-ended in nature to merely mean that this type of company is characterized by fixed shares that are on issuance at any particular time. An advisory firm, on the other hand, takes an optional form.
Investment companies deal with a specified single portfolio and ensure the cash is managed dependent on the already laid down rules as per the contract specifications. Advisory firms whereas deals with making recommendations that must be approved with investors.
An investment company concerns itself with the management of assets of various securities such as bonds so as to benefit their investors by ascertaining their investment objectives. An advisory firm, on the other hand, is concerned with enlightening their clients on various investment assets that are viable.
Regarding portfolio management, an investment company adopts a discretionary portfolio management approach whereas an advisory firm takes up advisory approach. In a discretionary approach, investment decisions are made at the discretion of the manager, and most investors leave most of the work to professionals as they do not participate much. Advisory portfolio management, on the other hand, involves a collaboration of both the investor and the manager.
Question two
With regards to buying and selling of shares, closed-end funds do the trading in the form of exchanges, and the purchase and selling of shares can be equated to purchase and to sell off stocks.

Open-end funds, on the other hand, are characterized by constant changes in its shares resulting from redemptions and even issuances.
The pricing of shares, i.e. selling and buying in closed-end funds is dependent on the prevailing market price. Meaning it’s affected by demand and supply. Whereas in open-end funds the selling and buying of shares are determined by the net asset value otherwise referred to as (NAV) of those assets being managed at the end of any business day. Extra charges on sales are also applicable here.
It’s important to make this liquidity distinction to give the investors the freedom to choose that which they are comfortable with.
Question three
Net profit is relevant because it indicates the success of an individual’s business apart from that an investor is able to determine the amount of money he or she has, either to invest more or not. For an individual who is seeking investment in their business activities, net profit is very relevant and crucial. Gross profit, on the other hand, is relevant for evaluating a company’s sales as it informs whether the company has made a loss or gained profit. To add on gross profit is relevant to understanding the efficiency of an organization by evaluating the gross profit in companies in comparison to other organization.
Question four
Managers who have a portion of their compensation tied to the performance of portfolios they manage can find themselves in an ethical dilemma with this kind of arrangement because they might end up foregoing or ignoring the set-out guidelines of managing a portfolio to protect their compensation. Falsifying finance reports of the portfolio they manage can be another ethical dilemma faced by a manager. In order to boost his or her compensation from the portfolio, a manager may be tempted to falsify reports in such a way that they indicate how well he or she has been managing the portfolio.
Bibliography
Wesley, C. 2017. “The Importance Of Gross Profit”. Bizfluent. https://bizfluent.com/facts-6773087-importance-gross-profit.html.