Defined Portfolio

DEFINITION of 'Defined Portfolio'

An investment trust that invests in a predefined portfolio of bonds and/or stocks that have been professionally selected by the company. Similar to some classes of mutual funds, these trusts are closed-ended and are not actively managed. The securities in the portfolio are fixed, and units can only be sold after the initial buying phase. These units tend to have a predefined life of a handful of years, after which they are liquidated and the proceeds are returned to the investors.

BREAKING DOWN 'Defined Portfolio'

A defined portfolio can trade at different prices throughout the day. Units of a defined portfolio are priced by supply and demand, which can lead to discrepancies in pricing from the net value of its underlying assets. Mutual funds can be out of sync with their net asset values (NAV), but are only priced once a day at the NAV as of the close of trading.

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RELATED FAQS
  1. Why do some closed-end mutual funds trade above or below their net asset values?

    Intuition tells us that a mutual fund's net asset value (NAV) (the net value of all assets within the mutual fund's portfolio ... Read Answer >>
  2. How often are mutual fund prices updated?

    Learn how often mutual funds must report their price, or net asset value, which is daily for open-ended registered investment ... Read Answer >>
  3. How do you find out the price of a mutual fund?

    The easiest way to find out the price of a mutual fund is to look at its net asset value (NAV). NAV is the total value of ... Read Answer >>
  4. Why is it that when investors realize returns on a mutual fund, its price tends to ...

    Mutual funds have been in existence since 1924, when the first open-ended mutual fund was created. Since then, the market ... Read Answer >>
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