7 Things Advisors Need to Know About Unit Investment Trusts<br><br>
Yet UITs can be a viable alternative for investors who prefer to hold a diversified blend of stock without sacrificing liquidity. Equally important, because the investments within the unit trust rarely change, it's easy for advisors and clients to track the performance of their diversified investment portfolio.
Here are seven facts advisors and their clients need to know about unit investment trusts:
Source: Kevin Mahn, President and Chief Investment Officer, Hennion & Walsh Asset Management.
1. What Are UITs?<br><br>
While it is not common, a trust may terminate early as described in the prospectus. UITs offer an attractive opportunity for investors to own a portfolio of securities via a low minimum, typically liquid investment.
As a point of contrast, while many actively managed funds continually buy and sell securities, thereby changing their investment mix, the securities held in a UIT generally remain fixed.
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2. How Are Securities In UITs Chosen?<br><br>
Once securities are selected, the UIT portfolios are then supervised accordingly throughout the life of the trust.
3. Can Securities Be Removed From a UIT at Any Time?<br><br>
4. What Options Are Available to Investors When a UIT Matures?<br><br>
At a reduced sales charge, investors may roll over into a new series of the same trust, if available, or any other SmartTrust? UIT available in the primary market*
Option #2: Maturity
Investors may do nothing and allow the portfolio units to mature. The trust will liquidate and they will receive a cash distribution of the trust's proceeds, if any.
Option #3: In-kind Distribution
Investors may generally request an in-kind distribution of the securities underlying the units if they own 2,500 or more units at either the time of purchase or maturity. Please see additional provisions set forth in the prospectus. SmartTrust? Unit Investment Trusts are generally long-term investment strategies and investors should consider their ability to invest in successive portfolios, if available.
Investors should consult their tax advisor to determine tax consequences associated with an investment from one portfolio to the next, if available. Refer to the trust prospectus for more complete in-kind distribution information. In-kind distribution is generally available for stocks traded and held in the United States. In-kind distribution may be modified or discontinued at any time without notice.
*Maturity rollover is considered a taxable event. Please refer to each trust's prospectus for complete rollover option information. Investors should be aware that there is a time limit to notify the trustee of the rollover.
5. Can Units of UITs Be Sold Prior to Maturity?<br><br>
Obviously, as the market fluctuates, so will the value of your units. Therefore, your units may be worth more or less than what you originally paid.
6. How Are UITs Priced?<br><br>
7. Are UITs Regulated?<br><br>
Investment companies are regulated primarily under the Investment Company Act of 1940. This federal statute is highly detailed and governs the structure and day-to-day operations of investment companies. Investment companies are also subject to regulations of the Securities Act of 1933, FINRA, and the Securities Exchange Act of 1934.
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