A Unit Investment Trust is a specialized investment company that
purchases a fixed portfolio of stocks, bonds or other securities.
Investors purchase units of the trust, which represent an undivided
ownership in the entire portfolio. This guide contains important
information on how Unit Investment Trusts can fit into your overall
- Types of Unit Investment Trusts
- About Equity Trust Investments
- Types of Trusts
- Stephens Investment Services
Because consistency and reliability are essential to strategic
investing, all Equity Trust strategies selected by Stephens must
have three inherent qualities:
Simplicity: The strategies must seek to
outperform specified indices by selecting portfolios using sound,
fundamental screens that reflect the historical behavior of the
Resilience: The strategies must show
back-tested results and have staying power even through bear
Discipline: The strategies dictate which
stocks are chosen for the portfolio. No emotional judgments are
made, and the strategies remain the same.
Unit Investment Trusts have stated maturities that range from
one year to as many as 30 years, depending on the type of
holdings that are in the portfolio. Trusts are designed to fill a
variety of investment needs and risk tolerance levels. Unit
Investment Trusts fall primarily into two categories: equity and
Equity Trusts are typically classified as
either strategies, sectors or indexes.
Strategy Trusts follow predetermined investment
criteria for selecting the stocks for the portfolio.
Sector Trusts are a major type of Equity Trust.
These portfolios are primarily composed of companies involved in a
specific industry, such as pharmaceuticals, energy, technology or
financial services. Sector portfolios seek to provide capital
appreciation by identifying market trends in specific areas and
investing in the companies that are positioned to benefit from
Index Trusts attempt to mirror the performance
of a specific market index. Indexing may provide growth potential
and may stand as a companion investment for diversification and
capital appreciation potential.
Fixed Income Trusts include portfolios that
consist of corporate bonds, international bonds, state and national
municipal bonds, government securities or mortgage-backed
securities. Because these bonds are held in a Trust, investors know
exactly what they are buying, the stated maturity date, the quality
ratings and the call dates for each of the bonds. Another important
factor is the distribution of income. With a Trust, investors can
receive either monthly, quarterly or semi-annual income.
Corporate Bond Trusts hold bonds issued by
corporations. They seek a high level of income coupled with low
National Municipal Bond Trusts hold bonds
issued by states and municipalities to finance schools, highways,
hospitals, bridges and other public projects. In most cases, income
earned on these securities is not taxed by the federal government
(although it may be taxed under state and local laws), making
municipal bonds an attractive investment for higher-income
State Municipal Bond Trusts work just like
national municipal bond trusts except their portfolios contain
issues of only one state. A resident of that state has the
advantage of receiving income free of both federal and state
personal income tax, and, in some cases, local and other taxes.
U.S. Government Securities Trusts seek to
provide income with a minimum level of risk by holding a variety of
government securities, such as U.S. Treasury bonds and other
government securities, considered among the safest of bond
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