Complete Guide To Investment Companies, Funds And REITs

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Introduction - Introduction

There are a wide variety of investments vehicles in which a large pool of investors combine their assets and entrust them to a professional portfolio manager. One of the main advantages of these types of investments is that they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities that would be quite difficult (if not impossible) to create with a small amount of capital. Fractional ownership in the portfolio is made through the purchase of shares. Each shareholder participates proportionally in the portfolio's gain or loss. Some of the more popular investments in this category include:

Mutual Funds
A mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors, for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Open-end mutual funds and closed-end mutual funds represent two of the three types of investment companies.

Unit Investment Trusts
Unit Investment Trusts (UITs) represent the third type of investment company. UITs buy and hold a fixed, unmanaged portfolio, generally of stocks and bonds, as redeemable "units" to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income.

Exchange-Traded Funds
An ETF is a fund that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

Hedge Funds
Hedge funds are aggressively managed portfolios that use advanced investment strategies in an effort to generate high returns (either in an absolute sense or over a specified market benchmark). Hedge funds can be thought of as mutual funds for the super rich.

Real Estate Investment Trusts
A Real Estate Investment Trust (REIT) is a dividend-paying stock that focuses on real estate.


Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

Net Asset Value (NAV)


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RELATED TERMS
  1. REIT ETF

    Exchange-traded funds that invest the majority of assets in equity ...
  2. Real Estate Investment Trust - ...

    A REIT is a type of security that invests in real estate through ...
  3. Unit Investment Trust - UIT

    An investment company that offers a fixed, unmanaged portfolio, ...
  4. Funds From Operations Per Share ...

    A metric for the performance of a real estate investment trust ...
  5. Funds Available For Distribution ...

    An informal measure of the amount of capital that is on hand ...
  6. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for ...
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  3. What are the pros and cons of owning an equity REIT versus a mortgage REIT? (AEC, ...

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  4. What are the potential pitfalls of owning REITs?

    Learn about pitfalls to investing in REITs, such as investors having to pay income tax, the REIT having to pay property tax ... Read Answer >>
  5. Is a REIT a type of ETF?

    Learn the differences between real estate investment trusts, or REITs, and exchange-traded funds, or ETFs, to see how the ... Read Answer >>
  6. Can mutual funds invest in hedge funds?

    Learn about mutual fund portfolio management techniques and mutual funds' ability to invest in hedge funds, as well as new ... Read Answer >>

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