A company that invests in mutual funds on behalf of shareholders. Customers purchase shares, and the company uses the revenue to buy shares in one or more mutual funds. Plan companies work with shareholders to determine a specific expected return over a certain number of years and invest in mutual funds accordingly. This allows shareholders the flexibility of a changing portfolio without needing to manage its day-to-day maintenance. These mutual funds are sometimes called contractual plan companies. See also: Periodic payment plan.
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A company that receives customer payments and purchases mutual fund shares when the customers wish to purchase shares in a fund on a periodic payment plan. Thus, the plan company acts as middleman in collecting the payments and crediting customer accounts.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.