Exchange Fund

An exchange fund is an investment vehicle that allows investors to pool their assets, typically shares of a specific stock, and exchange them for ownership in a diversified portfolio. This enables investors to defer capital gains taxes on their original holdings while reducing risk through diversification. By swapping their concentrated investment in one stock for a broader range of assets, they can better manage their exposure to market fluctuations. Exchange funds are often used by wealthy investors looking to rearrange their portfolios without triggering immediate tax liabilities.