What types of bonds do unit investment trusts (UITs) purchase?
A unit investment trust, or UIT, is a variation of a closed-end mutual fund but has a definite termination date, which may be rolled over into a subsequent new UIT to maintain continuity. Most invest in a fixed portfolio of bonds that are held until they mature. This sets UITs apart from bond mutual funds, which can buy and sell bonds daily. According to “The Investing Kit” (Dearborn Financial Publishing, Inc., Chicago), “These UITs purchase primarily debt securities issued by entities in the United States. Each trust typically purchases bonds or notes that fall into a particular category of maturities — that is, short term, intermediate term or long term. Within each category, the trust can be classified as high quality, medium quality or low quality. “U.S. bond trusts also can be classified as being either taxable or tax-exempt. Taxable bond UITs invest in bonds that pay taxable interest income, such as corporate and U.S. government bonds. Tax-exempt bond UITs invest in bonds that p
