Unit investment trusts are one of the easiest ways to invest in stocks and bonds, while obtaining diversification, professional securities selection and other benefits you would not receive if you purchased those securities directly.

If you would like to participate in today's stock and bond markets but lack the time, experience or capital to structure a diversified investment portfolio properly, unit investment trusts may deserve your close attention.

How Unit Trusts Work

A unit investment trust (UIT) can be a fixed portfolio of various equities (stocks), municipal bonds, corporate bonds, U.S. government bonds, government agency securities or foreign securities that are professionally selected to meet stated investment objectives. Trust portfolios are "defined" and are not managed, so there are no ongoing fees. In certain limited circumstances, securities may be sold or replaced before maturity to protect the interest of unit holders.

You invest by purchasing units representing an ownership interest in the trust's securities. Your units entitle you to a pro rata share of the principal of the securities and of any income produced. You receive your principal back when the trust matures. All UITs have a stated maturity, which might range from six months to 30 years.

* Diversification to minimize risk. Your risk is generally reduced because unit trusts hold securities from many different issuers. To achieve comparable diversification on your own would require considerable capital.

* Professional selection and supervision to assure quality. Delivering investment quality is a top priority of many unit trusts, and this quality is achieved through a stringent securities selection process and ongoing monitoring of trust portfolios.

* Attractive monthly income. While bonds generally pay interest on a semi-annual basis and stocks pay dividends quarterly, you can usually elect to receive monthly checks for your share of a trust's income. This feature is particularly appealing to retirees and other individuals who need cash for current spending.

* Automatic reinvestment to increase overall returns. You can choose to have trust distributions reinvested at no additional sales charge in a reinvestment plan that is described in each trust's prospectus. Automatic reinvestment keeps your money continuously at work and gives you the benefit of compounding. This type of systematic investing is an excellent method of building wealth for the future.

* Convenience. Unit trusts allow you to participate in the securities market through an investment that is easy both to buy and to own. The trustee handles all paperwork and administration for you.

* Predictability. Because each trust's investments are fixed, investors get something they can count on: a known or "defined" portfolio with a known maturity and, with fixed-income trusts, dependable monthly income. Trusts are generally structured so that early redemption by one or two issuers will not dramatically affect quality or yield. However, returns will vary as bonds mature, are redeemed or sold.

* Liquidity at no sales charge. Although not legally obliged to do so, many brokerage firms maintain a secondary market for the resale of units. The price you receive is based on the then-current value of the securities in the portfolio, as determined by an independent evaluator. The price you receive may be more or less than the price you originally paid.

* Low minimum purchase. You can invest in most trusts with a minimum investment of approximately $1,000. In certain trusts, the minimum for IRA accounts is $250.

* Cost effectiveness. Because UIT portfolios do not charge management fees, your yield is not reduced over time. The offering price generally includes a one-time sales charge, and volume discounts may be available on larger orders.

* Suitable for retirement accounts. Because of their low minimum purchase price, unit trusts are convenient investments for IRAs, Keoghs and certain other retirement plans.

Match Specific Unit Investment Trusts to Your Specific Needs

Investors can choose from a wide variety of UITs to meet their financial needs. Whether you're seeking to increase current income, reduce taxes, build a retirement nest egg or accumulate college education funds, there's a unit trust product available to fill the bill. And, because of their special features, unit trusts can be just as attractive for seasoned investors of substantial means as for beginning investors with only a modest amount to invest.

A financial services professional can help you decide which trust or trusts are right for you. These representatives will be able to provide you with prospectuses on specific trusts. Please read the prospectus carefully before you invest or send money.

Gary Barker, an Account Executive at Dean Witter, specializes in portfolio management, retirement planning and asset allocation. He can be contacted at 800-755-5203.

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