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Meaning / Definition of

Unit Investment Trust (UIT)

Categories: Finance,

A UIT may be a fixed portfolio of bonds with specific maturity dates, a portfolio of income-producing stocks, or a portfolio of all of the securities included in a particular index. Examples of the latter include the DIAMONDs Trust (DIA), which mirrors the composition of the dow jones industrial average (DJIA), and Standard & Poor's depositary receipts (SPDR), which mirrors the Standard & Poor's 500-stock index (s&p 500). Index UITs are also described as exchange traded funds (ETFs).UITs resemble mutual funds in the sense that they offer the opportunity to diversify your portfolio without having to purchase a number of separate securities. You buy units, rather than shares, of the trust, usually through a broker. However, UITs trade more like stocks than mutual funds in the sense that you sell in the secondary market rather than redeeming your holding by selling your units back to the issuing fund. Further, the price of a UIT fluctuates constantly throughout the trading day, just as the price of an individual stock does, rather than being repriced only once a day, after the close of trading. As a result some UITs, though not index-based UITs such as DIAMONDS or SPDRs, trade at prices higher or lower than their net asset value (NAV). One additional difference is that many UITs have maturity dates, when the trust expires, while mutual funds do not. A fund may be closed for other reasons, but not because of a predetermined expiration date.

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Definition / Meaning of

Preference Shares

Categories: Stocks, Fundamental Analysis, Accounting,

capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. Like common stock, preference shares represent partial ownership in a company, although preferred stock shareholders do not enjoy any of the voting rights of common stockholders. Also unlike common stock, preference shares pay a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability to do so. The main benefit to owning preference shares are that the investor has a greater claim on the company's assets than common stockholders. Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholders. In general, there are four different types of preferred stock: cumulative preferred stock, non-cumulative preferred stock, participating preferred stock, and convertible preferred stock. also called preferred stock.

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