17. Investments. Unit Investment Trusts
If you missed last weeks post in the investment series, don’t forget to check it out, there was some great information you may find useful about investing with treasuries.
Stock market investing has an appeal for many people because of its ability to generate a lot of capital quickly provided that one knows how to pick the right stocks in a pinch. However, what about those people who just want to invest their money and save it for the long term?
There are mutual funds to be sure, but even these require a commitment to managing the underlying securities and paying attention to the market overall. Is there any type of lucrative hands-off approach to investing? There certainly is…
What Is A Unit Investment Trust?
Unit Investment Trusts, also known as UITs are the answer for many people. When one invests in a UIT, one is investing in a portfolio made up of lots of different kinds of securities, which is then held for a fixed period of time until the point of maturity.
The securities that make up a Unit Investment Trust can vary widely, from municipal bonds to corporate bonds, and even common stock. In the event that common stock is part of a UIT, however, it will typically be of the dividend producing variety to ensure at least some pay off.
UITs are very popular among those who want to generate a continuous and steady stream of income without worrying about “watching the market” or having to choose that one investment that will pay off big.
The only real drawback to this is that, because of the long maturity rate of these investments, and the fact that the portfolio’s interest rate is fixed, it’s possible for a UIT to be overwhelmed by inflation. In other words, the cost of living is bound to rise at least some, while the interest rate on your Unit Investment Trust will remain the same as when you purchased it. On the other hand, the certainty of payout can more than make up for this, if you go in knowing what you’re dealing with.
See you next week for part 18 of Investments.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009
Tags: Common Stock, Investing, Investment, Stock Market, UIT, Unit Invesment Trust, Unit Trust
