Definition

Noun: A unit investment trust (UIT) is a type of investment company, registered with and regulated by the Securities and Exchange Commission (SEC). It is created for a fixed term and offers a fixed, unmanaged portfolio of securities (such as stocks or bonds) in the form of redeemable units to investors. Unlike mutual funds, a UIT is not actively managed; its portfolio is selected at the trust's creation and held until the trust's termination date.

Usage

A unit investment trust allows investors to buy a diversified portfolio through a single purchase. - She decided to diversify her savings by purchasing shares in a unit investment trust focused on municipal bonds. - The financial advisor explained that a unit investment trust has a defined termination date, at which point the underlying assets are liquidated and proceeds are distributed to unit holders.

Advanced Usage

• Creation and Structure: A sponsor creates a UIT by depositing a specific, fixed portfolio of securities into the trust. The trust then issues units representing fractional undivided interests in that portfolio. These units are sold to investors.
• "To buy/hold/sell units in a unit investment trust": This phrasing describes the investor's action regarding the UIT's shares.
  • Many conservative investors choose to hold units in a unit investment trust for its predictable income stream.

Variants and Related Words

• UIT: The common abbreviation for "unit investment trust."
• Investment Company: The broader legal category that includes UITs, along with mutual funds and closed-end funds.
• Redeemable Security: The type of financial instrument (the "unit") that a UIT issues, which can typically be sold back to the trust or sponsor at its net asset value.
• Fixed Portfolio: Describes the key characteristic of a UIT's holdings, which are not traded during the trust's life.

Synonyms

• Fixed Trust: (Less common) A term sometimes used interchangeably with unit investment trust, emphasizing its static portfolio.
• Unmanaged Fund: Highlights the distinction from actively managed funds like most mutual funds.

Related Terms and Concepts

• Net Asset Value (NAV): The per-share value of the UIT's underlying portfolio, used to price units.
• Sponsor: The entity (often a brokerage or investment firm) that creates and markets the UIT.
• Termination Date: The predetermined date on which the UIT will dissolve and distribute its assets to unit holders.

Noun

1. a regulated investment company consisting of professional managers who issue redeemable securities representing a portfolio of many different securities
   • you can invest in a unit investment trust for as little as $1000