What are different types of investment trust?

Investment trust is a way to combine more investors for mutual investment. The exact definition and setting of investment trust differs slightly from country to country. The general principle is that investment trust is legally considered a society in itself and that investors buy a share in society and then receive a share of the profits it receives from their investments. This may have tax advantages: for example, in the UK, the investor pays a tax share tax, but does not pay the tax for any profit it will receive if and when selling the event in trust.

There are several changes to basic investment trust. The version in the United States, known as unit investment trust, or UIT, works a similar legal way in that trust is considered to be society itself. The main difference is that the confidence of investment in unit investments exists only for a predetermined period and does only one set of investment rather than for sale. This means that once trust is active, does not need an investment manager.

At the end of the specified period, trust is liquidated in a way that refunds investors, plus or minus any profits or losses from the investment. Investors then pay taxes only on the basis of any profits during the life of trust. This is, unlike a mutual fund where taxes are based on the performance of the fund's investment throughout the year, regardless of when the investor bought the fund. This creates the possibility that the investor could lose and then be taxed on the basis of the year -round profits of the fund.

One variation on UIT is Split Capital Investment Trust. This allows investors to choose between two or more forms of trust in trust. Money paid by confidence at the end of the specified period is assigned in a specific order, which means the variegates with a particular type of share is more likely to get paid while paying investors with another type of share noThere must be no money.

This different risk is reflected in two ways. First, those with the safest type of share may not be eligible to receive part of the dividends that trust receives from its investment. Secondly, the purchase price for riskier types of shares will usually be lower.