Investment Companies
All investment companies begin by selling shares in themselves to the public. The proceeds are then used to buy a portfolio of securities. Most investment companies are managed companies, offering professional management of the portfolio as one of the benefits. One less well-known type of Investment Company is unmanaged. We begin here with the unmanaged type and then discuss the two types of managed investment companies. After we consider each of the three types, we focus on mutual funds, the most popular type of investment company by far for the typical' individual investor.
Unit Investment Trusts
An alternative form of. Investment Company that deviates from the normal managed type is the unit -investment trust, (OIT), which typically is an unmanaged, fixed-income security portfolio put together by a sponsor and handled by an independent trustee. Redeemable trust certificates representing claims against the assets, of the trust are sold to investors at net asset value plus a small commission. All interest (or dividends) and principal repayments are distributed to the holders of the certificates. Most unit investment trusts hold either equities or tax-exempt securities.
The assets are almost always kept unchanged, and the trust ceases to exist when the bonds mature, although it is possible to redeem units of the trust.
In general, unit investment trusts are designed to be bought and held, with capital preservation as a major objective. They enable 'investors to gain diversification, provide professional, management that takes care of all the details, permit the purchase of securities by (he trust at a cheaper; price than, if purchased individually, and ensure minimum operating costs.. If conditions change, however, investors lose the ability to make rapid, inexpensive, or costless changes in their positions.
Unit Investment Trusts
An alternative form of. Investment Company that deviates from the normal managed type is the unit -investment trust, (OIT), which typically is an unmanaged, fixed-income security portfolio put together by a sponsor and handled by an independent trustee. Redeemable trust certificates representing claims against the assets, of the trust are sold to investors at net asset value plus a small commission. All interest (or dividends) and principal repayments are distributed to the holders of the certificates. Most unit investment trusts hold either equities or tax-exempt securities.
The assets are almost always kept unchanged, and the trust ceases to exist when the bonds mature, although it is possible to redeem units of the trust.
In general, unit investment trusts are designed to be bought and held, with capital preservation as a major objective. They enable 'investors to gain diversification, provide professional, management that takes care of all the details, permit the purchase of securities by (he trust at a cheaper; price than, if purchased individually, and ensure minimum operating costs.. If conditions change, however, investors lose the ability to make rapid, inexpensive, or costless changes in their positions.
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