Unit Investment Trust

A Unit Investment Trust is fixed portfolios of assets sold to investors. You purchase a share or set of shares, called units, from an investment bank at a small premium to the net asset value. That investment bank purchases securities, equities or bonds, from the market and deposits them in the unit investment trust. The UIT will occasionally send you profits earned. The payment schedule is defined by the trust, occurring monthly, quarterly, bi-annually, or annually. The founders of the Unit Investment Trust earn money from selling shares slightly above the actual net asset value of the UIT. They always sell entry at a premium to net asset value.

It’s important to note that the trust is fixed. Equities will permanently remain in the trust unless delisted from the marketplace. In the case of bonds, when the bonds mature they will not be replaced. Eventually the entire selection of bonds will mature, and all interest and principle will be returned to the UIT’s shareholders. The unit investment trust isn’t managed beyond the initial selection of bonds in the portfolio. If you wish to exit the investment trust you resell your shares to the UIT’s managing bank at net asset value. They can resell the shares to a new investor or may liquidate securities paid for by your investment to compensate you.