What is a holding company and how does it operate?

A holding company is designed for one specific purpose – to purchase and hold shares in other companies. Whereas a normal company is formed to provide products and services to clients, a holding company essentially ‘outsources’ that. This type of company will own assets in other companies, which then provide products and services to the public.

So, what does this mean for investors?

Buying shares in a holding company means that you are essentially accessing a number of other companies. This gives you exposure to multiple securities through a single purchase.

Exchange-traded funds (ETFs) offer a similar style of investing. Just as an ETF holds multiple shares inside a fund, a holding company holds other securities.

Today,…