Unit investment trust (UIT),
Definition of Unit investment trust (UIT):
Type of the US investment company that invests in a fixed portfolio of securities which are resold to investors through brokers as redeemable certificates (representing undivided interest) called units. This arrangement allow unit-holders to build a diversified portfolio at a cheaper price, and to receive income in proportion to their individual investments. It is basically a closed end mutual fund, and expires either on a fixed date or (in the case of bonds) on the securitys maturity date.
A unit investment trust (UIT) is an investment company that offers a fixed portfolio, generally of stocks and bonds, as redeemable units to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income. Unit investment trusts, along with mutual funds and closed-end funds, are defined as investment companies.
Investment companies offer individuals the opportunity to invest in a diversified portfolio of securities with a low initial investment requirement. UITs are sold by investment advisors and an owner can redeem the units to the fund or trust, rather than placing a trade in the secondary market. A UIT is either a regulated investment corporation (RIC) or a grantor trust. A RIC is a corporation in which the investors are joint owners, and a grantor trust grants investors proportional ownership in the UIT's underlying securities.
How to use Unit investment trust (UIT) in a sentence?
- A unit investment trust (UIT) is a U.S. financial company that buys or holds a group of securities, such as stocks or bonds, and makes them available to investors as redeemable units.
- Like open-ended mutual funds, UITs are bought and sold directly from the company that issues them, although sometimes they can be bought on the secondary market; like closed-end funds, UITs are issued via an initial public offering (IPO). .
- UITS are similar to both open-ended and closed-end mutual funds in that they all consist of collective investments in which many investors combine their funds to be managed by a portfolio manager.
- Also unlike mutual funds, UITs aren't actively-traded, meaning securities aren't bought or sold unless there's a change in the underlying investment, such as a corporate merger or bankruptcy. .
- Unlike mutual funds, UITs have a stated expiration date based on what investments are held in its portfolio; when the portfolio terminates, investors get their cut of the UIT's net assets.
Meaning of Unit investment trust (UIT) & Unit investment trust (UIT) Definition