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.

  1. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  2. Passive Management

    A style of management associated with mutual and exchange-traded ...
  3. Active Management

    The use of a human element, such as a single manager, co-managers ...
  4. Closed-End Fund

    A closed-end fund is a publicly traded investment company that ...
  5. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  6. Asset Management

    1. The management of a client's investments by a financial services ...
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  1. What is a permanent portfolio?

    A permanent portfolio is a portfolio construction theory devised by free-market investment analyst Harry Browne in the 198 ... Read Full Answer >>
  2. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  3. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  4. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
  5. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
  6. Do mutual funds pay dividends?

    Depending on the specific assets in its portfolio, a mutual fund may generate income for shareholders in the form of capital ... Read Full Answer >>

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