investment vehicle, registered with the SEC under the investment company act of 1940, that purchases a fixed portfolio of securities, such as corporate, municipal, or government bonds, mortgage-backed securities, common stock, or preferred stock.
investment vehicle registered with the Securities and Exchange Commission under the investment company act of 1940, that purchases a fixed portfolio of securities, such as corporate, municipal or government bonds, mortgage-backed securities, common stock, or preferred stock. Units in the trust, which usually cost at least $1,000 ($250 for IRAs), are sold to investors by brokers for a sales charge that is typically 4% for traditional municipal bond trusts and 1%–2% for equity trusts, which feature reduced sales charges when the trusts are rolled over. The trust expires when bonds mature or, in the case of some equity funds, at a specified future date. Unit holders receive an undivided interest in both the principal and the income portion of the portfolio in proportion to the amount of captial they invest.
Traditionally, the majority of UITs held municipal bonds. More recently, however, equity UITs have become predominant. Among the most popular variations were those holding high-yield stocks in the dow jones industrial average ( dogs of the dow) or the Standard & Poor's 500 Index and their counterparts on foreign exchanges. UITs are the legal vehicle for some Exchange-Traded Funds.
