OEICs - Open-Ended Investment Companies
Introduction
Open-Ended Investment Companies (OEICs) are stock market-quoted collective investment schemes. Like investment trusts and unit trusts they invest in a variety of assets to generate a return for investors. They share certain similarities with both investment trusts and unit trusts but there are also key differences.
An OEIC (pronounced 'oik') is a pooled collective investment vehicle, in company form. OEICs first became available in May 1997 and were introduced as a more flexible alternative to established unit trusts.
An OEIC may have an 'umbrella' fund structure, allowing for many 'sub-funds' with different investment objectives. This means you can invest for income and growth in the same umbrella fund, moving your money from one sub fund to another, as your investment priorities or circumstances change. Some OEIC providers allow you to do this without charge as you stay within the same share class (with the same charging structure). OEICs may also offer different share classes for the same fund.
By being "open ended", OEICs can expand and contract in response to demand - just like unit trusts. The share price of an OEIC is the value of all the underlying investments, divided by the number of shares in issue. As an 'open-ended fund' the fund gets bigger and more shares are created as more people invest. The fund shrinks and shares are cancelled as people withdraw their money.
You can invest into an OEIC through an ISA (Individual Savings Account). Each time you invest in an OEIC fund, you will be allocated a number of shares. You can choose either income or accumulation shares - depending on whether you are looking for your investment to grow or to provide you with income - providing they are available for the fund you want to invest in.
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