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What is Widely Held Fixed Investment Trust ?

648 reads · Last updated: December 5, 2024

A widely held fixed investment trust (WHFIT) is a type of unit investment trust (UIT) with at least one interest held by a third party. Investors who purchase shares of the trust receive any regular payments of interest or dividends earned on the equities or bonds held in trust.

Definition

A Widely Held Fixed Investment Trust (WHFIT) is a type of Unit Investment Trust (UIT) where at least one interest is held by a third party. Investors who purchase shares of this trust receive any periodic interest or dividends earned from the stocks or bonds held by the trust.

Origin

The concept of WHFIT originated in the mid-20th century as a response to the growing demand for diversified investment tools. They were designed to provide investors with a simple way to access a diversified portfolio while enjoying regular income.

Categories and Features

WHFITs are generally categorized into two main types: equity trusts and bond trusts. Equity trusts primarily invest in stocks, offering dividend income, while bond trusts invest in bonds, providing interest income. The main features of both include providing regular income and relatively stable investment returns, though they may also face market volatility risks.

Case Studies

A typical case involves a large financial institution launching an equity WHFIT that invests in a basket of blue-chip stocks, with investors receiving quarterly dividend distributions. Another case is a bond WHFIT focusing on government bonds, offering stable interest income, suitable for investors with lower risk tolerance.

Common Issues

Investors often worry about the liquidity of WHFITs, as these trusts typically have a fixed term. Additionally, market fluctuations can affect the value of the trust, so investors need to understand their risk tolerance.

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