municipal bond unit trust

Municipal Bond Unit Trust

A unit investment trust that invests exclusively in municipal bonds. A unit investment trust is an unmanaged portfolio of securities, the rights to which are sold to investors as shares or units. In a municipal bond unit trust, coupons from the bonds are passed on to unit holders, just as in a mutual fund. Unit holders pay a certain percentage of the value of their purchases to the investment company creating the municipal bond unit trust. It can be advantageous to bond investors because it creates a diversified portfolio and is less expensive than the investor going out and buying the individual municipal bonds.

municipal bond unit trust

An unmanaged portfolio of municipal securities that is put together at the time the units are initially sold. Tax-free interest and repayments of principal are passed through to the owners, who are charged a fee of around 4% to acquire the units. This investment allows individuals to have a diversified portfolio of municipal bonds without investing large sums of money. See also unit investment trust.