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Simple English definitions for legal terms
investment trust
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A quick definition of investment trust:
An investment trust is a type of company that collects money from different sources and uses it to buy a variety of assets, like stocks or real estate. The company manages these assets and tries to make a profit for its investors. Investment trusts can also issue certificates that people can buy, which represent a share of the trust's assets. Some investment trusts specialize in certain types of assets, like real estate or technology companies.A more thorough explanation:
An investment trust is a type of investment company that manages a portfolio of diverse assets by investing money collected from different sources. It can be a corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons. The Investment Company Act of 1940 defines an investment company as an issuer of securities that is primarily engaged in the business of investing, reinvesting, or trading in securities, issuing face-amount certificates of the installment type, or investing in securities and owning or holding investment securities having a value exceeding 40% of the value of the issuer's total assets.
Examples of investment trusts include mutual funds and real estate investment trusts (REITs). Mutual funds pool money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. REITs invest in income-producing real estate properties and distribute at least 90% of their taxable income to shareholders as dividends.
For instance, if you invest in a mutual fund, your money is combined with money from other investors to buy a variety of stocks, bonds, or other securities. The fund's managers make investment decisions on behalf of the investors and charge a fee for their services. Similarly, if you invest in a REIT, you own a share of the real estate properties that the trust owns, and you receive a portion of the rental income generated by those properties.