Listen to a Business English Dialogue about Unit share investment trust
Terry: Hi Ruby, have you heard about unit share investment trusts in finance?
Ruby: No, I haven’t. What are they?
Terry: A unit share investment trust, also known as a unit investment trust (UIT), is a type of investment fund that pools money from multiple investors to buy a fixed portfolio of stocks, bonds, or other securities.
Ruby: Oh, I see. So, it’s like a mutual fund or an exchange-traded fund (ETF)?
Terry: Yes, it’s similar in some ways, but unlike mutual funds or ETFs, UITs have a fixed portfolio that doesn’t change over time, and they have a specific termination date.
Ruby: That’s interesting. So, how do investors make money with unit share investment trusts?
Terry: Investors make money through capital appreciation if the value of the securities in the trust increases over time, or through income generated from dividends or interest payments.
Ruby: Are there different types of unit share investment trusts?
Terry: Yes, there are different types, including equity trusts, bond trusts, and mixed trusts that hold a combination of stocks and bonds.
Ruby: I see. So, investors can choose the type of trust that aligns with their investment objectives and risk tolerance.
Terry: Exactly. It’s important for investors to understand the characteristics and risks associated with each type of trust before investing.
Ruby: Are unit share investment trusts actively managed?
Terry: No, typically, UITs are passively managed, meaning they follow a predetermined investment strategy and don’t involve active trading by a fund manager.
Ruby: I understand. So, it’s a more hands-off approach to investing compared to actively managed funds.
Terry: Yes, that’s correct. UITs offer a straightforward investment option for investors who prefer a set-it-and-forget-it approach.
Ruby: Are there any fees associated with unit share investment trusts?
Terry: Yes, there can be fees, including sales charges, management fees, and administrative expenses, so it’s essential for investors to carefully review the prospectus before investing.
Ruby: Got it. So, investors should consider the fees and expenses along with the investment objectives and risks before deciding to invest in a unit share investment trust.
Terry: Absolutely. It’s essential to understand all aspects of the investment before making a decision.