Portfolio of Securities

• The basic idea behind unit investment trusts is similar to other types of collective investment schemes. With a unit investment trust, an investment company buys a large amount of securities like stocks and bonds. Then the investment company sells shares of this portfolio to investors. Each investor owns a percentage of all of the securities that are held within the portfolio. The investors can sell their shares back to the investment company at any point for the net asset value of the shares.
  
  

Fixed Terms

• One of the key differences between mutual funds and unit investment trusts is the fixed term. Mutual funds are set up to run indefinitely. Unit investment trusts have a fixed term associated with them. This means that after the term expires, the securities in the portfolio are sold and the proceeds are given back to the investors in the fund. This creates a different dynamic for investors, as you cannot keep the money in the unit investment trust past the term end.
  
  

Fixed Portfolio

• Another feature of the unit investment trust is that it has a fixed portfolio. With this type of investment, you do not have a fund manager that oversees the fund on a day-to-day basis. Once the securities are purchased for the fund, they remain in it for the entire term. The unit investment trust does not buy and sell securities regularly like mutual funds do. This also cuts down on the fees associated with the fund because it does not require active management.
  
  

Considerations

• Although the unit investment trust is a simple type of investment, it can provide you with some large returns in some cases. Before choosing a unit investment trust, review the past experience of the company that sets it up. One of the major advantages of investing in a unit investment trust is that you do not have to spend the time to research the individual investments that make up the portfolio and you can leave this up to a professional.