These are collective investments that pool your money to purchase a range of stocks and shares. They have a simple pricing structure. It’s likely that many unit trusts will become OEICs eventually.
OEICs (pronounced ‘oik’) can set different charges for different types of investors and different investment amounts, and in this sense offer a more flexible alternative to established unit trusts.
OEIC’s, by being ‘open-ended’, are able to respond to market demand, and can contract or expand in size accordingly. As more people invest into such ‘open-ended’ funds, more shares are created and the fund increases in size. When people withdraw their money from these funds, the fund shrinks in size and shares are cancelled.
One of the key features of OEIC’s is the ability to invest in ‘sub-funds’ of the main fund, each of which can have different investment objectives. This means that it’s possible to invest for income and growth in one single fund, without having to purchase a range of share types.
OEIC’s can be invested in through an ISA (Individual Savings Account). When you invest into a fund, you are allocated a number of shares. Providing they are available for the fund you want to invest in, you are able to choose either income shares (if you require an income from your investment), or accumulation shares (if you are looking for your investment to grow).
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