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Anyone familiar with Unit Investment Trusts?
Old 06-13-2017, 12:24 PM   #1
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Anyone familiar with Unit Investment Trusts?

My friend, who has a financial advisor gave me a copy of his portfolio. In his portfolio he has some nifty stuff called “unit investment trusts.” What are these? Do they tend to be costly to buy, sell and own?

Two examples:

First Trust Capital Strength Port. Series 30 term 07/27/2017
Symbol FRPSLXC

First Trust Dividend Strength Series 31 term 03/12/2018
Symbol FIERAXC
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Old 06-13-2017, 12:58 PM   #2
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They are funds that have a firm ending date. I could not find the two noted above but the same company sells similar products with a sales charge of up to 3.87%. Too rich for my blood.
http://www.ftportfolios.com/Retail/d...x?FundID=12543
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Old 06-13-2017, 03:19 PM   #3
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Thanks. I figured there was a sales charge. I also figure there is a management fee (along with other fees) but getting the numbers appears to be difficult (at least for me). The financial planner sounds to be evasive. The numbers must be somewhere.
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Old 06-13-2017, 03:34 PM   #4
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They must be great investment vehicles. If they were garbage i would have been advised to buy them. hahahah
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Old 06-13-2017, 03:49 PM   #5
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I'd been told by people smarter than me to stay away.
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Old 06-13-2017, 05:06 PM   #6
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Not the fees that scared me away but the fact you need to hold till the end or redeem back to the issuer. No secondary market to sell into.
http://www.investopedia.com/terms/u/uit.asp
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Old 06-13-2017, 05:18 PM   #7
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Using the link in post #2 and then following it a bit deeper (including a click or two) leads to more information. However, it doesn't seem as if you (I) can find the value of the unit and therefore it cannot be compared to another product that might be like it. Can't even be compared to the usual and applicable benchmarks.

BTW, my friend is/was a competent guy. Was in the IT world and retired at age 47. He seems to have a blind spot about investing.
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Old 06-13-2017, 05:54 PM   #8
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SPY is a unit investment trust, too, so just being a UIT does not mean it is a rip-off.

Google found this on UITs:

Unit Investment Trusts (UIT): An Introduction | ETF Database
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Old 06-13-2017, 06:05 PM   #9
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Originally Posted by LOL! View Post
SPY is a unit investment trust, too, so just being a UIT does not mean it is a rip-off.

Google found this on UITs:

Unit Investment Trusts (UIT): An Introduction | ETF Database


Interesting. Never knew SPY had a termination date.

The only UITs I heard of had sales fees. I don't pay sales fees.
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Old 06-13-2017, 06:13 PM   #10
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DW had a bunch of UITs when we married. Bought them through a friend of a friend who probably got a nice commission.

The way they worked is they gave off a dividend every month that was largely return of capital, so their value kept going down but your basis went down with it. By the end of their life, they were worthless but you had your investment back plus a little.

Just out of curiosity, we told our discount broker to sell a couple of them and that happened easily, so there is a secondary market out there.
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Old 06-13-2017, 11:09 PM   #11
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They are basically CEFs (maybe other types as well) that have an ending date when they disband the fund and give all the money back to shareholders.

Where they can be particularly useful is with bond fund CEFs.
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Old 06-13-2017, 11:58 PM   #12
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DW had a bunch of UITs when we married. Bought them through a friend of a friend who probably got a nice commission.

The way they worked is they gave off a dividend every month that was largely return of capital, so their value kept going down but your basis went down with it. By the end of their life, they were worthless but you had your investment back plus a little.

Just out of curiosity, we told our discount broker to sell a couple of them and that happened easily, so there is a secondary market out there.
Your correct there's a secondary market. I wrote code so they could be traded. They actually did have a need cause they paid for my(and many others) time.
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Old 06-14-2017, 01:28 AM   #13
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This will help.

https://www.sec.gov/fast-answers/answersuithtm.html
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Old 06-14-2017, 07:39 AM   #14
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Originally Posted by ESRwannabe View Post
Thanks for the link. It helped.

However, I don't understand the need for units, why they exist, or why someone would buy one. It would seem that there would be comparable mutual funds or etf's that would be less expensive to own and easier to understand. (I'm not asking the poster, I'm just asking).
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Old 06-14-2017, 07:51 AM   #15
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Quote:
Originally Posted by redduck View Post
Thanks for the link. It helped.

However, I don't understand the need for units, why they exist, or why someone would buy one.
I suspect they aren't bought, they are sold by FA's because they offer a nice commission - which is the primary reason they exist.
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Old 06-14-2017, 09:05 AM   #16
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Originally Posted by redduck View Post
Thanks for the link. It helped.

However, I don't understand the need for units, why they exist, or why someone would buy one. It would seem that there would be comparable mutual funds or etf's that would be less expensive to own and easier to understand. (I'm not asking the poster, I'm just asking).
Units were available long before ETFs became available. Keep in mind fund costs have fallen dramatically over 30 years, not so much for UITs.
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Old 06-14-2017, 09:24 AM   #17
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I've heard people complaining about UTIs before - sounds like something to stay away from.
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Old 06-14-2017, 10:22 AM   #18
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Interesting. Never knew SPY had a termination date.
I looked up SPY's prospectus and they do have a termination date:

"The Trust has a specified lifetime term. The Trust is scheduled to terminate on the first to occur of (a) January 22, 2118 or (b) the date 20 years after the death of the last survivor of eleven persons named in the Trust Agreement, the oldest of whom was born in 1990 and the youngest of whom was born in 1993. Upon termination, the Trust may be liquidated and pro rata Units of the assets of the Trust, net of certain fees and expenses, distributed to holders of Units."
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Old 06-15-2017, 10:23 PM   #19
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I've heard people complaining about UTIs before - sounds like something to stay away from.


Lol. Subtle wit is under-appreciated.
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