The material set forth in this section and the variable contracts section will comprise 26% of your upcoming examination. Since this is the most heavily tested topic on your exam, ensure you are comfortable with all topics. Refer to weblinks located throughout the sections should you need to review the basics.

Investment Companies
An investment company is a corporation or a trust through which individuals invest in diversified, professionally managed portfolios of securities by pooling their funds with those of other investors. Rather than purchasing combinations of individual stocks and bonds for his or her portfolio, an investor can purchase securities indirectly through a package product like a mutual fund.

According to the Investment Company Institute, there are over 8,100 mutual funds (excluding funds of funds, or mutual funds made up of other mutual funds), 254 closed-end funds, 226 exchange-traded funds and 37 UITs.. 91.2 million people owned mutual fundsĀ  with nearly $8.6 trillion invested in these investment vehicles alone. With so many different products to choose from, it is easy to see why FINRA requires you to master the fundamentals of investment company function, management, regulation and operation.

There are three fundamental types of investment companies: unit investment trusts (UITs), face amount certificate companies and managed investment companies. In the following section we discuss each investment company type in more detail. Remember that all three types have the following things in common:

  • An undivided interest in the fund proportional to the number of shares held
  • Diversification in a large number of securities
  • Professional management
  • Specific investment objectives


Unit Investment Trust (UIT)

Related Articles
  1. Investing

    Investing In A Unit Investment Trust

    UITs offer professional portfolio selection and a definitive investment objective. Are they right for you?
  2. Investing

    Looking to Buy Mutual Funds Online? Here Is How

    Learn how to buy mutual funds online; discover which websites offer mutual fund trading services, how to choose a fund and typical fees.
  3. Investing

    Trading Mutual Funds for a Living: Is It Possible?

    Find out why trading mutual funds for a living isn't your best bet, including how funds discourage short-term trading and which options may better serve you.
  4. Investing

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
  5. Investing

    Mutual Funds Are Awesome - Except When They're Not

    This investment is very popular, but that doesn't mean it comes without risk.
  6. Investing

    5 Reasons to Choose Mutual Funds over ETFs

    Discover five reasons to choose mutual funds over ETFs, such as the wide variety of funds available, the higher service quality and the lack of commission fees.
  7. Investing

    A Brief History Of The Mutual Fund

    This popular investment vehicle has seen its share of ups and downs, successes and scandals. Read all about it!
  8. Investing

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  9. Investing

    Make Sure You Avoid Adding These Mutual Funds to Your 401(k)

    Find out which five types of mutual funds you should avoid in your 401(k), including why buying this year's hottest fund is likely a losing bet.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center