High Wealth Investors Benefit from Diversified UITs

For investors seeking the right blend of diversification, UITs offer a unique investment vehicle for stable investment strategy. Bond trusts and stock trusts can be formed as unit investment trusts, exhibiting the structural flexibility of the trust model. Bond UITs invest in domestic and foreign corporate, and government bonds, and stock UITs in both domestic and international market stocks.

Bond UITs afford consistent income at a lower risk rate. Payments from bond UITs proceed until date of maturity, at which time the full asset of the contract is paid out. Stock UITs “issue a fixed number of units (like closed-end funds)” presented as initial public offering (“IPO”) during a period, or secondary market security, however IPO unit purchases offer “unitholder” investors a net cost basis in a trust.

UITs have the option of buying securities directly from the issuer. The average minimum investment requirement for direct purchase is about $1,000 per unit. This of course, makes secondary market focused UITs more attractive for trust diversification, as the lower cost per unit is usually well-balanced by annual dividend payout, and capital gains taxation avoidance. Notwithstanding those investors preferring high exposure with the expectation of exponential payouts, most UITs are foremost directed at stability. Regardless of strategy, when stock UITs reach a targeted capital appreciation amount, unit dividend income is distributed to investors.