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What they Are – How they Work
By Staff Reporters
Bond uni-trusts are a type of closed-end investment company. Their funds issue a fixed number of shares, and the value of the shares is determined by the market for them.
Obtaining unit trust bonds
A physician-investor wishing to buy into a closed-end fund must buy shares from an owner of the shares of that fund. The same holds true for selling shares. The market price may or may not be related to the net asset value of the fund. If the market for the shares is higher than the net asset value, then the shares are said to be trading at a premium. If the market for the shares is lower, they are said to be trading at a discount.
Appropriate uses
Unit trusts are generally sold in units of $1,000. As funds are received into the trust, reflecting payment of principal and interest, they are distributed to the shareholders. Because the portfolio is fixed and therefore does not incur the higher expenses normally associated with research and trading, the unit trust’s expenses are relatively low. For these reasons, unit trusts are appropriate for physician-investors who need a steady and periodic income. The doctor-investor who needs to withdraw capital may do so by selling shares back to the unit trust at their current net asset value. Again, depending on where interest rates are, the medical professional may or may not suffer a capital loss.
Assessment
For more terminology information, please refer to the Dictionary of Health Economics and Finance.
www.HealthDictionarySeries.com
Conclusion
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