Non-fixed UITs invest in:
A Stocks only
B Stocks and bonds only
C Mutual funds only
D Stocks, bonds, and mutual funds
The correct answer and explanation is:
The correct answer is D: Stocks, bonds, and mutual funds.
A Non-fixed Unit Investment Trust (UIT) is a type of investment vehicle that pools money from multiple investors to purchase a fixed portfolio of securities. Unlike mutual funds, UITs have a set portfolio that does not change after it is created. A non-fixed UIT is not limited to a specific type of security and may invest in a combination of stocks, bonds, and mutual funds.
Here’s a breakdown of why each type of investment is included:
- Stocks: Non-fixed UITs often invest in stocks because they represent ownership in companies and provide an opportunity for capital appreciation. Stock investments allow investors to potentially benefit from the growth of the companies included in the portfolio.
- Bonds: Bonds are debt securities that offer a fixed income over time. Non-fixed UITs may also invest in bonds to provide a stable income stream for investors. Bonds are typically considered lower-risk investments compared to stocks.
- Mutual Funds: Some non-fixed UITs may invest in other mutual funds, which provide diversification by holding a wide range of securities. This allows UITs to achieve exposure to a broader range of asset classes or strategies.
By diversifying across these three types of investments, non-fixed UITs aim to balance risk and reward. These UITs are structured to meet various investor goals, whether they prioritize growth (through stocks), income (through bonds), or diversification (through mutual funds).
Ultimately, non-fixed UITs provide flexibility in asset selection and are suitable for investors looking for a diversified portfolio that may adjust over time based on the underlying investment choices.