Diversify Your Portfolio With Unit Investment Trusts (UITs)

Unit investment trusts offer a simple, convenient and affordable way to develop a well-diversified investment portfolio of stocks and/or bonds without having to select and manage the individual investments yourself.

How Unit Investment Trusts Work

Unit investment trusts (UITs) are registered investment companies that generally purchase a fixed, unmanaged portfolio of stocks and/or bonds that are preselected by investment professionals to meet a specific goal (although there is no guarantee the unit trust will meet its objectives).

Fixed portfolios. The investments within a unit trust are fixed for a predetermined time, which means the investments do not change unless a company is bought or merged with another company or a company’s financial condition becomes irreparable. This means you always know what you own.

Buying trust units. Unit investment trusts are established for specified periods of time and liquidated to trust unit holders on their predetermined termination dates. A limited number of trust units are offered during presale purchase periods, which can last anywhere from one day to one year.

Units of a unit investment trust can often be bought for as little as $1,000 ($500 for an IRA). Owning a unit of the trust means you own a proportional share of all the investments within the portfolio. It also means that, for a fraction of the cost, you can have diversified investments (including stocks and/or bonds) that may normally require $100,000 or more to purchase on their own.

Selling trust units. You can sell your trust units back to the unit trust at any time prior to the trust’s termination for their net asset value (based on the value of the underlying securities) less any remaining deferred sales charges, which provides you with the liquidity you may need. Some unit investment trusts then resell those returned units to other investors.

Because the market value of the trust units fluctuates with changes in market conditions and the value of the underlying securities, shares of the unit trust may be worth more or less than their original price when sold.

When to Consider Unit Investment Trusts

Unit investment trusts may be suitable for most investors, whether they’re conservative, more aggressive or somewhere in between. That’s because unit trusts provide diversification of quality stocks in a convenient and affordable package without losing the liquidity many investors need. And because the investments within the unit trust seldom change, it’s easy to track the performance of your diversified investment portfolio.

In addition, because a wide array of unit trusts with different investment objectives and levels of diversification are available, you may be able to find a unit trust that’s right for you, whether you’re a new investor or a sophisticated investor with complex needs.

Risks of Investing in Unit Investment Trusts

Unit investment trusts are not actively managed. Securities in the trust will not be sold to take advantage of market conditions. The trust may continue to hold securities even though their market value and dividend yields may have changed. A unit investment trust generally carries the same investment risks as the portfolio of securities within the trust.

Investing in Unit Trusts (UITs) Through Wells Fargo Advisors

Your Financial Advisor can provide you with prospectuses for any unit investment trusts (UITs) that are currently available. You should carefully consider the investment objectives, risks, charges and expenses of the unit trust before investing. The prospectus contains this and other important information. You should read it carefully before investing or sending money.