unit investment trust
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.
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.
- 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.
- 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.
- 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.
- 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.
- 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