What is managed investment trust? A managed investment trust (MIT) is a fund that exposes you to specific markets, geographies, or asset classes. These are also unit trusts, closed-end funds, and collateral trust certificates. There are two main types of MITs – equity trusts and fixed income trusts. Equity trusts offer investors exposure to global equity markets. In contrast, fixed-income trusts invest in fixed-income securities such as bonds and cash.
WHAT IS MANAGED INVESTMENT TRUST? WHAT ARE THE BENEFITS OF MANAGED INVESTMENT TRUSTS?
There are many benefits to investing in a managed investment trust (MIT). Some of the most important ones are: MITs can allow you to get exposure to markets, geographies, or asset classes you otherwise wouldn’t be able to invest in. This is especially true for equity trusts that invest in specific regions, industries, or companies.
MIT’s are a low-cost way to diversify your portfolio. While no investment is risk-free, diversifying your portfolio can help mitigate the risk of losing money from any asset or sector. MIT allows you to invest in companies or geographies you might not have direct access to. For example, if you live in the United States but want to invest in China, you can do so through a China-focused MIT.
TAX ADVANTAGES OF MANAGED INVESTMENT TRUSTS
Managed investment trusts (MITs) are taxed as trusts. Like mutual funds, they are subject to the “trust tax” and not the “corporation tax” like other companies. Therefore, the trust tax benefits investors because it leads to lower taxes than what would be due if the investments were held in a corporation.
The trust tax is applied at the trust level and is not included in the investor’s income tax. MIT’s can also provide tax advantages for investors who hold the trusts in a tax-advantaged account, such as a 401(k) or an Individual Retirement Account (IRA). Investors in these accounts can defer taxes on capital gains until they withdraw from the account.
Limitations Of Managed Investment Trusts
Investors should also be aware of some potential disadvantages of MIT. These include: MITs can be risky, especially for investors who don’t have a diversified portfolio. If you put all your money into one MIT that doesn’t perform well, your investment will likely go down. For example, let’s say you invest all of your money in a single MIT that focuses on startups in the biotech industry.
Your entire investment could decrease significantly if the biotech industry doesn’t perform well. MITs are generally not appropriate for people just starting who don’t have enough money for diversification. While you may be able to invest in a single MIT with a small amount of money, you’ll need a more significant amount to diversify your holdings across multiple MIT’s.
HOW TO INVEST IN A MANAGED INVESTMENT TRUST?
There are three main ways to get exposure to a managed investment trust (MIT). The first is to buy shares directly from the trust during an initial public offering (IPO). The second is to buy existing shares from another investor. And the third is to buy synthetic shares that track the performance of MIT.
If you buy shares directly from the trust at the IPO, you’ll likely have to pay a premium over the initial offer price. That’s because MIT typically issues more shares during IPOs, which drives the price. If you buy existing shares from another investor, you may pay a higher price than the current market price. That’s because you’re not buying shares from the trust. Instead, you’re buying shares from an individual investor who owns MIT.