Investment banking is different from commercial and retail banking. It is used as a 'sell side' for trading (cash and other securities like market making and for easy transactions) and security promotions (like research and underwriting) and/or a 'buy side' which includes public investment in mutual funds, pension funds and hedge funds so as to maximize on their investment returns. Several firms have both the sell and the buy side.
Such a bank has a private side to it and a public side so that all information in both the sides is kept confidential; no insider information from the private side is allowed to cross over and made public, and the latter deals with public information such as analysis for stock markets. The public held company has several investors and its shares are traded on stock exchange in general. It is able to sell its securities and thus raise funds for private investment though it has to disclose much information to the public. A private company, on the other hand, does not have to disclose much information so that it has fewer competitors. A public side of the bank has to provide bureaucratic papers and certified accounts according to Government requirements but this is not an issue for a private owned investing bank. Often, there are more investors with the public side than there are for the private side. A pubic company can become private by buying out its shareholders. This can take place through a 'leveraged buyout'.
Investment banks help companies take new stock issues or new bond issues to the financial market, and generally mediate between the investors and the issuers. These banks may buy all the shares available at an agreed preset price; they then will sell the same to the public making profit thereby. Alternatively, the banks act as intermediary for the issuers taking commission from them for the selling of the securities they want to sell.
Investment banks can also help the company in preparing their prospectus and provide their vital data which becomes greatly beneficial to the company as well to those who intend to invest in it. The banks also partake in the sale of big blocks of securities (bonds and stocks) which were issued earlier, like the companies involved in mutual funds, and sell to institutional investors.
In brief, an investment bank does not take any deposit. It is precisely a financial intermediary and provides various services which concern only investment. The services may include intermediation between investing public and securities issuers, underwriting, acting as a broker on behalf of institutional investors, corporate reorganization and mergers.
Investment banking is very much in vogue these days and is continuing to pick up. It is more in demand than the retail or the commercial banks. Some advantages of investment in such banks include availability of a wide range of functions pertaining to finances, the stock issuance can be controlled and its sale to the public regulated; the best advantage is that there is no limitations to the income.