Mutual Funds vs. UIT
There are so many options to choose from when considering investment opportunities. Many novice and experienced investors opt to have a professional handle their investments through mutual funds or a unit investment trust (UIT).
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Features
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A mutual fund pools investors money and invests in a variety of stock, bonds, commodities or combination depending on the fund's objectives. A UIT also purchases different securities, combines them into a trust, and sells pieces of the trust to individuals.
Benefits
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The benefits of both mutual funds and UITs are that an investor limits risk by owning various securities and/or investment vehicles. Also, both are managed by professionals.
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Term
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A UIT has a fixed life span or term. Some will redeem after one year or operate for 30 years or longer. Mutual funds are ongoing operations with no fixed date to end.
Function
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A UIT purchases and maintains a fixed number of stocks, bonds or other securities that are sometimes concentrated in one area. A mutual fund must abide by the rules of the fund and hold a certain number of diversified securities.
Transactions
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Mutual funds can actively buy and sell securities. This is not the case in a UIT whose shares are fixed upon inception.
Gains
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A UIT does not generate capital gains to distribute to shareholders as a mutual fund does. Gains, losses and/or taxes are generally not incurred for a UIT holder until they are sold. A UIT does pay dividends monthly or quarterly as do some mutual funds.
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