1.2.1.2.1. Types of Investment Companies
The most common types of investment companies are unit investment trusts and management companies. A unit investment trust is a company that purchases a pool of equity or debt securities and holds them until a set termination date. It sells unit interests in this pool to the general public. Since the pool of securities does not change from the time that the trust is created, the trust is considered unmanaged. A management company, by contrast, manages and trades the portfolio of securities it acquires, and the portfolio does not have a set termination date.
Management companies come in two types. Open-end management companies offer a portfolio of securities whose capitalization varies with every purchase and sale within the fund. When investors buy into the portfolio, new shares are issued, and when investors sell th