Unit investment trust

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Unit investment trust

Money invested in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium to net asset value.

Unit Investment Trust

An investment company that offers an unmanaged portfolio of stocks and/or bonds, packaging the portfolio as shares that are redeemable from the trust after a certain period of time. Unit investment trusts are designed to give shareholders income from dividends and/or coupons. See also: Mutual fund.

unit investment trust

An unmanaged portfolio of investments put together by an investment adviser and sold in units to investors by brokers. Units of a trust usually sell for $1,000 including a sales commission of approximately 4% at the time of the initial offering. Sponsoring brokers usually maintain a secondary market for the units, the value of which depends on the value of the securities held by the trust. Because of the initial sales charge, unit investment trusts are usually not attractive for short-term trading. Also called fixed trust.

Unit investment trust (UIT).

A UIT may be a fixed portfolio of bonds with specific maturity dates, a portfolio of income-producing stocks, or a portfolio of all the securities included in a particular index.

Examples of the latter include the DIAMONDs Trust (DIA), which mirrors the composition of the Dow Jones Industrial Average (DJIA), and Standard & Poor's Depositary Receipts (SPDR), which mirrors the Standard & Poor's 500 Index (S&P 500). Index UITs are also described as exchange traded funds (ETFs).

UITs resemble mutual funds in the sense that they offer the opportunity to diversify your portfolio without having to purchase a number of separate securities. You buy units, rather than shares, of the trust, usually through a broker.

However, UITs trade more like stocks than mutual funds in the sense that you sell in the secondary market rather than redeeming your holding by selling your units back to the issuing fund.

Further, the price of a UIT fluctuates constantly throughout the trading day, just as the price of an individual stock does, rather than being repriced only once a day, after the close of trading. As a result, some UITs, though not index-based UITs such as DIAMONDS or SPDRs, trade at prices higher or lower than their net asset value (NAV).

One additional difference is that many UITs have maturity dates, when the trust expires, while mutual funds do not. A fund may be closed for other reasons, but not because of a predetermined expiration date.

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As a result of this case, FINRA launched a targeted exam in September 2016 focused on UIT rollovers.
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The amazing initiative by UIT for encouraging and supporting high - achievers needs to be carried forward by all stakeholders.
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