What is a Diversified Investment Company?

For all the things you know that are important you know that saving for retirement is something very important for your financial future – and that is why you probably have a retirement portfolio with a large variety of investment options, including holdings in a diversified investment company; if you don’t have a retirement portfolio, now may be a time to start looking into it.

Diversified investment companies use the old adage, “never putting all your eggs in one baskets,” and incorporates those beliefs into their style of investments. A diversified investment company is a Unit Investment Trust (UIT) or mutual fund that is not allowed to have more than 5% of their assets in a single company or to have 10% of a company’s voting shares in correlation to 75% of its portfolio holdings. This has been determined by the Investment Company Act legislated instituted in 1940.

The strategy of a diversified investment company is to invest in a large variety of securities and companies. Except for the percentage of investment allotments, they act and behave very much like other mutual funds. Not only can diversified investment companies be open ended or close ended organizations, but they also work on the behalf of small companies and individual investors, thus increasing their similarity to other mutual funds.

Because diversified investment companies have professionals managing the investments, they are decent places for novices to consider investing their money and setting up their retirement plans there.

If you are considering moving your eggs to many baskets, it is important to review all the collateral material or “prospectus” on the diversified investment company.  All the terms, fees, penalties (if any), company’s involvement, and history of returns on investment should be included in the diversified investment company’s prospectus.

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