Unit Investment Trusts or UITs
Unit Investment Trusts or UITs are investment companies which buy and hold a portfolio of stocks or bonds, and make their shares, termed 'units', available to investors. Like closed ended funds, UITs have a fixed number of units and have low management fees as the shares are not redeemed or created often. Like mutual funds, UITs have a portfolio of diversified investments like many corporate bonds or stocks.
Unit investment trusts are offered to investors via initial public offerings or IPOs, and have a typical price of $1,000 per unit. They are managed by either a RIC (Regulated Investment Trust) or a grantor trust. Many UITs allow investors to buy and sell the shares in secondary markets after the IPO. The portfolio is already defined and fixed; there is no buying or selling of portfolio assets after the portfolio creation. Thus the investment objective is kept intact and the management costs are kept to low levels. The only exception is that some portfolio adjustments may arise because of corporate mergers, acquisitions and bankruptcy.
Unit investment trusts have a fixed life span. For bond UITs it is usually the maturity date of the bonds in the portfolio. On the termination date, the remaining portfolio is dissolved and paid to the unit holders according to the number of units they hold. The advantages of investing in UITs include diversification, low maintenance costs and fixed portfolio. Before choosing unit investment trusts, investors should carefully consider the portfolio assets and invest in one which most fulfils one's investment objectives.
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Unit investment trusts are offered to investors via initial public offerings or IPOs, and have a typical price of $1,000 per unit. They are managed by either a RIC (Regulated Investment Trust) or a grantor trust. Many UITs allow investors to buy and sell the shares in secondary markets after the IPO. The portfolio is already defined and fixed; there is no buying or selling of portfolio assets after the portfolio creation. Thus the investment objective is kept intact and the management costs are kept to low levels. The only exception is that some portfolio adjustments may arise because of corporate mergers, acquisitions and bankruptcy.
Unit investment trusts have a fixed life span. For bond UITs it is usually the maturity date of the bonds in the portfolio. On the termination date, the remaining portfolio is dissolved and paid to the unit holders according to the number of units they hold. The advantages of investing in UITs include diversification, low maintenance costs and fixed portfolio. Before choosing unit investment trusts, investors should carefully consider the portfolio assets and invest in one which most fulfils one's investment objectives.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by NobleTrading at
10:27 AM
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