What characterizes a Unit Investment Trust (UIT)?

A Unit Investment Trust (UIT) is characterized by its creation of an unmanaged portfolio of securities. Unlike mutual funds that are actively managed by fund managers who buy and sell securities to try to outperform the market, UITs have a fixed portfolio that does not change. Once the trust is established, it holds a specific set of securities for a defined period, and investors typically receive payments as the trust generates income from these securities or upon their maturity.

This passive approach means that investors in UITs benefit from diversification and a predetermined outcome based on the performance of the trust's initial securities, rather than trying to beat the market through managerial decisions. Understanding this distinction is crucial for evaluating investment options, especially when considering the trade-off between active and passive management strategies.