Buying a unit investment trust is a great way to diversify your investment portfolio. However, it is important to remember that it is not a guaranteed investment product. It may be riskier than other types of investments.
The price of unit investment trusts is determined by the current market value of underlying securities. This includes cash and other assets. In addition, inflation decreases the value of assets. Therefore, the net asset value may be lower than the initial purchase price. The value of units may also increase or decrease if shares are sold before the trust terminates.
The performance of traditional unit trusts sold by brokerage firms can be tracked by contacting the brokerage firm. However, a broker cannot provide legal advice. A FINRA-registered broker must provide customers with accurate information on the risks and rewards of unit trusts.
The value of UITs fluctuates due to market volatility. Investors should be aware of the time limit for contacting the trustee if they intend to roll over their investments. The reclassification of trust income may be taxable, and wash sale provisions may apply. A reclassification may be disclosed on a client’s year-end tax documents.
Unit investment trusts are a great way to get exposure to investment opportunities in the stock market. However, they may not be suitable for all investors. If you are not a professional investor, you should consider hiring an independent financial adviser to help you minimize the risks