Moneyzine
Contents
/Personal Finance/Unit Trust (Unit Investment Trust)

Unit Trust (Unit Investment Trust)

Moneyzine Editor
Author: 
Moneyzine Editor
1 mins
September 25th, 2023
Advertiser Disclosure

Definition

The term unit trust refers to a pooled investment fund that holds assets and distributes profits directly to shareholders. Unit trusts are typically closed-end funds; which means the number of shares is fixed and does not increase or decrease over time.

Explanation

Also referred to as a unit investment trust (UIT), a unit trust (UT) allows investors, or unit holders, to pool their money together to purchase assets. The fund is structured as a trust, with the investors as beneficiaries. Assets held in the trust, and selected by a fund manager, typically include real estate and mortgages in addition to more traditional securities such as stocks and bonds.

The value of the underlying assets can be determined by multiplying the total number of units issued by the trust's Net Asset Value (NAV); although unit shares may sell on the secondary market at prices that are above, or below, the trust's NAV. The advantages of unit trusts include the ease of buying and selling shares (liquidity), and the use of professionals to manage the trust's assets.

Unlike a mutual fund, the assets in a unit trust investment are not actively traded. Instead, the portfolio will consist of a relatively small number of investments when compared to a mutual fund. UITs may also charge investors a sales fee or load, oftentimes close to 5%. Finally, unit trusts will also carry a termination date, on which the trust will distribute the proceeds from the sale of assets to the unit holders.

Related Terms

Related Content

How to Make a Million Dollars in 10 Years
Truthfully, this title should actually be “How to Make a Million Dollars in 10 Years Without Going Into Debt", but that is just getting a little too winded for my liking. It’s true though!
March 26th, 2024
How to Apply Maslow’s Hierarchy to Your Money This Year
You might vaguely remember your psychology teacher talking about Maslow. He pointed at a picture of a triangle as you nodded off in the back of the school room.
March 27th, 2024
How to Tackle Multiple Savings Goals
When there’s only so much money to go around, there are often multiple savings goals competing for your money. Think of the young professional who’d like to get a more reliable car, buy a house, and save for retirement. Or consider the young family that’s saving for college, retirement, and a bigger house.
March 22nd, 2024
The Countdown to Early Retirement: 10 Expenses to Eliminate
Dreaming of waving goodbye to the daily grind five years ahead of schedule? The road to early retirement is paved with more than good intentions; it requires a meticulously crafted strategy with surprising twists. It's not solely about what you should be doing—like diligently saving a portion of your income or investing wisely—but also about what you need to stop doing.
March 22nd, 2024
What’s Your One Page Financial Plan? Mapping out Your Future
“What’s your one page financial plan?” — This is the absolute best question that I’ve heard asked in a long time. Instead of talking about your hot stock pick or your fancy investment that shields you from paying taxes, I think it’s time for all of us to step back and ask ourselves the most intelligent question of all, “Why the heck do I care about money anyway??”
March 14th, 2024

Contributors

Moneyzine 2024. All Rights Reserved.