Unit investment trusts are fixed portfolios of profitable securities that cannot be sold or traded. Investors can purchase a fraction of the trust and earn income from the securities. This SEC-approved trust structure is profitable and stable, often comprised of municipal bonds. It’s a low-risk investment opportunity for new investors.
Unit investment trusts are fixed portfolios that are comprised of securities that are considered to be profitable in nature. The contents of the wallet are considered fixed, as they cannot be sold, traded, or removed from the wallet unless the collateral in question is called. Investors may purchase a fraction or unit of the trust and enjoy the benefits of any income generated by the securities held in the trust.
In the United States, the concept of a unit investment trust dates back to 1940. It was during that year that the idea of the unit investment trust was first registered with the Securities and Exchange Commission. The idea was to create a trust structure that was permanent in nature and would not involve any purchase or sale of securities within the trust before the security reached maturity or was called. This agreement would allow investors to own a part or share in the unit’s investment trust by purchasing a part of the total package. All investors would share in the earnings generated by the securities held in the unit’s investment trust.
This SEC-approved model for a trust agreement has proven profitable for many investors over the years. In many cases, a unit investment trust will be comprised of a series of municipal bonds, making it possible for the trust to represent an investment opportunity that is considered very stable. Instead of purchasing individual bonds, the investor can purchase units related to the overall portfolio and enjoy the proceeds from the activity of all the bonds included in the trust. In general, the investment company that oversees the unit investment trust is responsible for providing financial reports to investors, as well as processing payments due to each investor associated with the trust.
A unit investment trust can be a great way for a new investor to get into deals with relatively little risk and still make money. Many trusts of this nature are structured so that the purchase of a single holding or portfolio unit requires only a small investment, in some cases no more than US$1,000. As with any type of investment, it is sound business practice for the investor to research the individual bonds or other securities contained within a unit investment trust, and become comfortable with the income-generating potential of each component.
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