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.

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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.

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.