There are two types of investment companies, the first is called an open-ended investment company, while the second is called a closed-ended investment fund. Both types are collective investment funds.
An open-ended fund, such as a unit trust, is one where a company creates new shares when new investors subscribe and cancel them when they sell their stake in the fund.
A closed-ended fund, such as an investment trust, is one where there is a fixed number of shares that investors buy and sell to one another. Closed-ended funds follow the same structure as a public company.
Investment companies typically buy and manage investments on behalf of their investors. The value of the fund is usually the value of the underlying investments that the company holds.
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