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Finance Dictionary and Glossary of Investment Terms
Unit Investment Trust
Definition 1.
UIT. An SEC-registered investment company which purchases a fixed, unmanaged portfolio of income-producing securities and then sells shares in the trust to investors. The major difference between a Unit investment Trust and a mutual fund is that a mutual fund is actively managed, while a unit investment trust is not managed at all. Capital gains, interest and dividend payments from the trust are passed on to shareholders at regular periods. If the trust is one that invests only in tax-free securities, then the income from the trust is also tax-free. A unit investment trust is generally considered a low-risk, low-return investment. Some investors prefer UITs to mutual funds because UITs typically incur lower annual operating expenses (since they are not buying and selling shares); however, UITs often have sales charges and entrance/exit fees. also called fixed investment trust or participating trust or unit trust.
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Definition 2.
A sort of mutual fund that holds a fixed portfolio of bonds; when these mature, the trust is dissolved. One advantage of a UIT, as they are known, is that, held to maturity and barring any default, you get your principal back. In a regular mutual fund that invests in bonds, rising interest rates could lower the value of your investment and conceivably you might never get all your principal back. UITs often have more stable monthly payouts. But UITs also typically levy a sales charge, and selling early entails a commission as well as the risk that you could be less than (or even more than) you originally invested, depending on interest rates.
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Definition 3.
Money invested in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium to net asset value.
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