Unit Investment Trust Information For The Uninitiated
Unit investment trust – the name can be a little scary if you are just learning about stocks, bonds and other kinds of investments. Really, these are excellent financial vehicles that will help you to make money over a specific period of time, and with very little effort on your part.
What Is A Unit Investment Trust?
A Unit Investment Trust, also called a UIT, is a very specific type of Investment Company. While there is a lot you can learn about UIT’s, there are some things that are common to nearly all of them. Once you have learned the basics, you will be more knowledgeable about investing as a whole.
A Unit Investment Trust has a definite beginning and a well defined end point. When you buy into a UIT, you will know exactly when it will end.
How a UIT begins: Normally, UIT’s are offered for sale on a one-time basis public offering. The public offering is for a specific amount of units, and the price is fixed.
You May Be Able To Buy Into An Existing UIT: Many Unit Investment Trust Sponsors maintain what is called a “secondary market”. The secondary market allows existing UIT investors to sell their UIT holdings back to the sponsor and allows new investors to purchase those holdings. Just remember, the number of shares in an individual UIT never increases or decreases.
A UIT is not involved in active trading: You will not find any UIT’s on the stock market. When the UIT is initiated, a specific blend of stocks and bonds are purchased and held for a specific period of time. Normally, no changes are made to the composition of the UIT.
Investors Know What They Are Getting: Due to the fixed nature of UIT’s, investors can simply read the prospectus to find out exactly what they are investing in.
How Can You Buy Into A Unit Investment Trust?
Before you invest in a UIT, be sure that you conduct research about it. Since UIT performance is often tied directly to the performance of the stock market, a UIT will reflect the general atmosphere of overall market performance just as most other financial vehicles will.
Many financial institutions and investment banks offer UIT’s as part of their overall menu of financial products. You should talk to your financial professional to determine whether UIT’s are available at your desired level of investment, and conduct research about the types of UIT’s that are commonly offered.
A Unit Investment Trust can be a great choice. They are low maintenance financial vehicles with a high level of liquidity. They offer stability because of the fixed nature of the stocks and bonds contained within, and they are often offered at a variety of prices. UIT’s are an important part of any well-diversified portfolio, so be sure to talk to your investment banker.