UITs are SEC-registered investment companies that follow a buy and hold strategy and are sold only by prospectus. Portfolios are professionally selected by the trust sponsor and are designed to follow a stated investment objective, although there is no guarantee that the objective will be met. UITs are fixed and not actively managed. Except in limited circumstances, portfolios will hold and continue to buy shares of the same securities even if their market values decline.
UITs dissolve on a mandatory termination date ranging from one to thirty years, which is established when the UIT is created, although some UITs may terminate more than fifty years after they are created. Short-term strategy trusts should be considered as part of a long-term investment strategy and you should consider your ability to pursue them by investing in successive trusts, if available. You will realize tax consequences associated with investing from one series to the next.
Like mutual funds, UITs provide you with a diversified basket of securities in one easy purchase. Buying these stocks or bonds individually could be time consuming, costly and possibly riskier. UITs are different from mutual funds in that the underlying securities are not actively traded. This enables investors to “know what they own” and helps avoid short-term capital gains. Unit holders are subject to taxes on their investment. Investors should consider the investment objectives, risks, charges and expenses associated with investing in UITs and should carefully review the prospectus which contains this and other information about the trust before investing.
Equity Unit Investment Trusts
Equity UITs are defined portfolios of domestic and/or international stocks. Security selection is based on the stated investment objective of the trust, such as capital appreciation, income or both. Equity UIT portfolios have various levels of risk tolerance from conservative to aggressive growth and investment style preferences, including sector, strategy, core, international, theme and index trusts.
Fixed Income Unit Investment Trusts
Fixed Income UITs are defined portfolios of domestic and/or international bonds and other fixed income securities. Security selection is based on the stated investment objective of the trust such as stable income stream, capital preservation and/or possible tax advantages. Fixed Income UITs have various levels of risk tolerance from conservative to aggressive and investment style preferences, including, taxable, tax-exempt, corporate bond, international bond, U.S. government securities and mortgage-backed securities.