A brief explainer about Mutual Company

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A private firm whose ownership lies with its customers is called a Mutual Company. These types of firms will rely heavily on its customers who are the very base of their firm. One common example of this type of firm are the insurance companies found across the globe.

Merits of investing in Mutual Company

Investing in a Mutual Company brings its own share of privileges to the investor. Firstly it gives the investor an opportunity acquire ownership in the very firm they are investing in to.

Another additional merit is the single minded focus that these companies show when it comes to operations. As most of these firms are formed by individuals having interest in a specific field they will often focus their operations in that particular field.

They also provide opportunity of earning maximum profits due to this specialized focus. In usual stock insurance companies stock holders and policy holders are different. This prompts these companies to often focus more on the interest and profit of stake holders rather than the people who have taken up their policy.

However, when one invests in a mutual company they will be focus of all benefits and maximum profit as they are both policy and stake holders. Thus making Mutual Companies a better pick when taking up an insurance.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow