How to Invest in Bond Unit Investment Trusts
A bond unit investment trust is a type of investment company that issues a set number of stocks or bonds that have a determined lifetime. Unit investment trusts will buy back the securities they offer at the net asset value if the investor doesn't want to wait until the set date of maturity. As a potential investor, you should know how to invest in bond unit investment trusts.
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Instructions
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Set up an account with a stockbroker if you don't already have one. Like most other investments, bonds unit investments trusts will issue the bonds, but they are sold to investors through brokers.
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Hold onto the bond unit investment trusts until they mature. You'll receive monthly payments on your bonds as they grow over time. This income is part of the interest from your investment and you'll receive the total amount once it matures, which is usually between 6 months to several years after the bonds are issued.
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Sell your bonds early only if you have an emergency financial situation. Luckily, almost all bond unit investment trusts will give you the entire principal back if you sell the bonds early. Bonds are generally stable in value and unaffected by the market, so they can be a more reliable source of funds than your stock or mutual fund holdings.
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Invest in some additional bonds with the same IUT if you have some extra investment money. Even though bond unit investment trusts generally don't add bonds past the initial public offering, the issuer may re-sell any bonds that are returned before maturity.
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Exchange your bonds for in-kind stock once they mature. If you have a set number of bond holdings, usually 2,500, you can often exchange them for an equal number of shares. This method will allow you to have more control over when you sell your investment if you wish to hold on to it after the bonds mature.
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Tips & Warnings
The bonds that you hold are from a portfolio that was created by the investment company; they are not bonds in that actual company.
Unit investments are priced at the end of the trading day.
Unlike mutual fund investments, bond unit investment trusts will allow you to see exactly what companies and industries are included in your portfolio. The website of the bond issuer will often post this information for investors to see.
