Thursday, December 11, 2008


Unit Trusts & Investment Trusts.

A unit trusts is a fund organization which mobilies savings /funds from small investors by selling units in the market. Therefore this is the collective or mutual fund. Sales proceeds of units or funds are then invested in the share/stock market. Units are periodically revalued by the trust managers & offered for purchase & sale at new prices. Individual investors or unit holders, trustee & the fund manager are three parties involved in a unit trust. The fund manager will invest money in shares to get maximum profit for the fund. Also dividends are distributed among the unit holders. Since small savers do not have information, knowledge & opportunity to invest in the share market, they can get the benifits of the share market investment through a unit trust. Also share market will expand due to unit trusts through the increased funds to the market. Unit trusts are open-ended institutions since they can buy back their units from unitholders. Unit trusts buy & sell one units dailly with unit holders.

Investment trusts are close -ended institutions since they cannot buy back one shares from the market. Investment trust is a company raising funds by selling shares to public for investment business in the stock market & is similar to other companies. Also, an investment trust is a corporate body setup under the companies act. A unit trust is setup under the trust ordinance & it is not a corporate body.

No comments: