Investment Trusts

Investment trusts are financial entities that manage asset portfolios for investors. There are Real Estate Investment Trusts (REITs) and Unit Investment Trusts (UITs). REITs pay dividends on the rent paid for properties or on the interest paid on mortgages or related securities owned by the trust. This type of trust is noted for its high yields and the degree of liquidity it offers. REITs are sometimes bundled into mutual funds for greater ease of investment and diversification.

UITs typically have a set number of shares and are limited to a small group of investors. The assets in the fund are held for a set period of time. Unlike other securities, the shares in a UIT are generally fixed and are simply held for the life span of the fund. This might be 10, 20 or even 50 years. At the end of this period all the shares are sold off and the proceeds are distributed to the investors. Bonds are a popular option for UIT investments since they mature at a set rate over time. If an investor wishes to back out early, he/she may have the option of selling shares back to the trust for their current value.

Fast Facts

  • UITs are a common choice for conservative investors who are looking for a steady rate of return.
  • The Internal Revenue Code requires a REIT to distribute 90 percent of all taxable income to its share holders in any given year.

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