[Unit investment trusts] differ from mutual funds in that they are a collection of specific stocks or bonds not actively managed once they are purchased as an investment.
Q. I heard there is a new investment fund that focuses on companies doing research specifically on prostate cancer. How does this work?
While many open-end mutual funds focus on the health care sector of the market, the companies they hold do not specifically indicate that their research is targeted at finding the cure for a specific disease. This is primarily due to the fact that a mutual fund, by its very nature, stresses diversification in order to minimize the risk-or fluctuation-of its share price. In order to provide an investment vehicle that focuses specifically on certain potential cures for the most destructive incurable diseases, one investment banking firm is pioneering the development of such a product.
Investing in an exchange traded fund allows investors the ability to invest in index-type portfolios that replicate the returns of many widely known indexes. "SPDRs" (Spiders) track the S&P 500 index, while "QQQ" tracks the technology heavy Nasdaq-100 Index.
It is important, however, to keep in mind that investing in VIOLTs is not a way to necessarily support the research activities of the specific disease. The stocks being bought are not initial public offerings, but rather stocks purchased in the secondary market as a pure investment to take advantage of the possibility of a cure, which would drive up the share price.
Physicians as a whole will need to do some research prior to investing in VIOLTs due to any perceived potential conflicts of interest. If you are involved with research or serve on certain pharmaceutical or industry boards, you should be sure that your investment does not create any ethical or legal issues arising from ownership of any of the companies that comprise the VIOLT.
Urologists, in particular, should take a close look at the stocks that focus on prostate cancer research, which currently include Medarex and Varian Medical, to be sure there are no issues or restrictions relative to ownership of these companies.
Q I recently rolled over my pension plan into an IRA rollover account. At the time, I was required to sign a very long agreement that really didn't make much sense to me. What are the key provisions of the agreement?
A Understanding any contract prior to signing it only makes sense. The IRA custodial agreement spells out the specific terms and conditions of your IRA.