Unit investment trusts are type of investment company, similar to mutual funds, closed-funds and exchange-traded funds. Unit trusts have some of the features of the other fund types plus a few unique ones. Unit investment trusts are sold almost exclusively through investment advisors and brokers.

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Unit Trust Characteristics

A unit investment trust starts with a fixed portfolio of securities, such as stocks and bonds, selected by the trust sponsor to meet the trust’s investment objectives. Once the securities are selected, the portfolio remains static and no securities are bought or sold. Investors buy shares or units of the trust. Every unit investment trust has a termination date on which all of the securities in the trust are sold and the proceeds paid out to unit owners.

Cost to Invest in UITs

The units of a UIT are purchased through an investment advisor at what is called the public offer price. The offer price is the current net asset value of the units plus a sales charge. The sales charge is used to pay the broker or investment advisor a commission. Once purchased, the units of an UIT will be valued at the net asset value. Reinvested dividends purchase additional units at the net asset value.

Types of Unit Trusts

References

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