Exam Tips and Tricks
Make sure you know the distinguishing features of each type of investment company! You are sure to see a question on the exam that will test your knowledge of this subject.


Unit Investment Trusts (UITs)
A unit investment trust, or UIT, is a company established under an indenture or similar agreement. It has the following characteristics:

  • The management of the trust is supervised by a trustee.
  • Unit investment trusts sell a fixed number of shares to unit holders, who receive a proportionate share of net income from the underlying trust.
  • The UIT security is redeemable and represents an undivided interest in a specific portfolio of securities.
  • The portfolio is merely supervised, not managed, as it remains fixed for the life of the trust. In other words, there is no day-to-day management of the portfolio.

Face Amount Certificates
A face amount certificate company issues debt certificates at a predetermined rate of interest. Additional characteristics include:

  • Certificate holders may redeem their certificates for a fixed amount on a specified date, or for a specific surrender value, before maturity.
  • Certificates can be purchased either in periodic installments or all at once with a lump-sum payment.
  • Face amount certificate companies are almost nonexistent today.

Management Investment Companies
The most common type of investment company is the management investment company, which actively manages a portfolio of securities to achieve its investment objective. There are two types of management investment company: closed-end and open-end. The primary differences between the two come down to where investors buy and sell their shares - in the primary or secondary markets - and the type of securities they sell.

  • Closed-End Investment Companies: A closed-end investment company issues shares in a one-time public offering. It does not continually offer new shares, nor does it redeem its shares like an open-end investment company. Once shares are issued, an investor may purchase them on the open market and sell them in the same way. The market value of the closed-end fund's shares will be based on supply and demand, much like other securities. Instead of selling at net asset value, the shares can sell at a premium or at a discount to the net asset value.

  • Open-End Investment Companies: Open-end investment companies, also known as mutual funds, continuously issue new shares. These shares may only be purchased from the investment company and sold back to the investment company. Mutual funds are discussed in more detail in the Variable Contracts section.


Mutual Fund Pricing

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

    Unit Investment Trusts Market: 3 Trends in 2016

    Learn more about unit investment trusts (UITs), and discover some of the most common trends in the UIT market to date in the year 2016.
  3. Investing

    What's a Unit Investment Trust?

    A unit investment trust is an unmanaged investment company that offers a fixed portfolio of stocks and bonds.
  4. Investing

    An Introduction To Closed-End Mutual Funds

    If you're looking to generate income for your investments, look no further.
  5. Investing

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  6. Financial Advisor

    Why You Should Consider These Closed-End Funds

    Advisors looking to recommend closed-end funds to clients might want to consider ones that have withstood the test of time. Here are a few examples.
  7. Investing

    4 Alternatives To Traditional Mutual Funds

    A rich offering of attractive alternatives have the open-ended mutual fund facing obsolescence.
  8. Investing

    Investing In Oil And Gas UITs

    Unit investment trusts provide direct exposure to the energy sector, fueling better returns.
Frequently Asked Questions
  1. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  2. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ...
Trading Center