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Unit Investment Trusts

IN ADDITION TO mutual funds, closed-end funds and ETFs, you might hear about a fourth type of fund: unit investment trusts. These are unmanaged baskets of securities sold by brokers during a onetime public offering period, with investors paying perhaps a 4% sales commission. Each UIT has a maturity date, though some sponsors of UITs will redeem the funds from investors before maturity.

Are UITs a good investment? Investors don’t appear wildly excited about them. According to the Investment Company Institute, there were 5,000 UITs outstanding as of year-end 2017, with combined assets of $84.9 billion, barely higher than the $84.8 billion recorded for 1997. UITs that hold stocks accounted for $73.3 billion of that total. By contrast, regular mutual funds managed $18.7 trillion as of year-end 2017, up from $4.5 trillion in 1997.

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