What is the difference between a mutual fund and a unit investment trust (UIT)?

The main difference between a mutual fund and a unit investment trust (UIT) lies in their structure and management approach.

A mutual fund is a professionally managed investment vehicle that pools money from multiple investors to invest in a diversified portfolio of securities, such as stocks, bonds, or a combination of both. The fund is managed by a team of professional fund managers who make investment decisions based on the fund's investment objective. Investors in a mutual fund purchase shares, and the value of these shares is determined by the net asset value (NAV) of the fund, which is calculated at the end of each trading day.

On the other hand, a unit investment trust (UIT) is a type of investment company that issues a fixed number of units to investors. Unlike mutual funds, UITs are not actively managed. Instead, they have a predetermined portfolio of securities that is established at the time of creation and remains fixed throughout the life of the trust. UITs typically invest in a specific type of asset, such as stocks, bonds, or a combination of both, and they have a specific maturity date. Investors in a UIT receive a proportionate share of the income generated by the underlying securities, and the value of their units is determined by the market value of the securities held in the trust.

In summary, the key differences between mutual funds and unit investment trusts are the active management approach of mutual funds versus the fixed portfolio of UITs, and the continuous pricing of mutual fund shares versus the market value pricing of UIT units.