Tontine

AAA

DEFINITION of 'Tontine'

A system for raising capital in which individuals pay into a common pool of money and then receive a dividend based on their share and the performance of investments made with the pooled money. The principal invested in the tontine is never paid back to the investor; rather the investor receives dividends until his or her death. If a "shareholder" dies, his or her shares are divided up among the surviving investors.




INVESTOPEDIA EXPLAINS 'Tontine'

This system is attributed to Lorenzo de Tonti, a 17th century Italian banker. Government-sponsored tontines paid dividends while investors were alive, but once all the investors died the government would absorb all the remaining capital. Tontines were used in the United States as a way of increasing the sale of life insurance in the 19th century, but have fallen out of use and are illegal in many parts of the country.

RELATED TERMS
  1. Blind Pool

    A limited partnership or stock offering with no stated investment ...
  2. Rental Pool

    A type of contract-law sharing arrangement. Rental-pool arrangements ...
  3. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  4. Lottery

    A game of chance, where winners are typically decided by a drawing. ...
  5. Protected Cell Company (PCC)

    A corporate structure in which a single legal entity is comprised ...
  6. Registered Holder

    Shareholders who hold their shares directly with a company.
Related Articles
  1. Personal Finance

    4 Tips For Joining An Investment Club

    These circles of like-minded people are a wonderful way to explore investing without laying out large sums.
  2. Options & Futures

    Long-Term Care Insurance: You Have Options

    The latest offerings provide more coverage and the ability to pick and choose what types of coverage you'll need.
  3. Personal Finance

    Investment Clubs Pool Assets, Expertise

    Forming a network of other like-minded investors and professionals can bolster returns.
  4. Fundamental Analysis

    How do you use Microsoft Excel to calculate liquidity ratios?

    Learn how to calculate the most common liquidity ratios in Microsoft Excel by inputting financial figures from a company's balance sheet.
  5. Economics

    America's Most Notorious Corporate Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  6. Investing Basics

    What is revenue cycle management?

    Learn more about revenue cycle management and why the healthcare industry in particular has adopted this payment process philosophy.
  7. Fundamental Analysis

    Is it important for a company always to have a high liquidity ratio?

    Understand the significance of the liquidity ratio and how it is used in conjunction with other measures to arrive at an overall evaluation of a company.
  8. Fundamental Analysis

    To what extent should you take a company's liquidity ratio into account before investing in it?

    Find out how important it is for an investor to know a company's liquidity ratio before deciding to invest, and why relying on one ratio can be dangerous.
  9. Fundamental Analysis

    How can a company quickly increase its liquidity ratio?

    Discover what high and low values in the liquidity ratio mean and what steps companies can take to improve liquidity ratios quickly.
  10. Investing

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center