investment company

Popular Terms
Public corporation organized to invest in large blocks of securities of diverse firms, and to obtain its capital from issues of shares or units. Investment companies give a small investor the advantage of a full time professional investment management, and a very much wider spread of risk that it would have been otherwise possible. They are divided into three major types: (1) Open-end funds (also called mutual funds) which have a floating number of issued shares, and sell or redeem their shares at their current net asset value (NAV); (2) Closed-end funds (also called investment trusts) which can sell only a fixed number of shares which are traded on stock exchanges, usually at a discount to their net asset value; and (3) Unit investment trusts (also called unit trusts) which sell their redeemable securities (called units) which represent interests in the securities held by the trust in its investment portfolio.
A unit holder is not a shareholder in a unit trust. See also investment club.

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