I’m racing through the SIE … the fixed UIT lacks flexibility in an ever changing world
Hey Damien, good morning from San Francisco! Great to have you on here
Thanks for using Achievable, @Damien! You’re right - fixed UITs are slowly becoming a dinosaur in today’s complex world of finance. FYI - they’re not heavily tested on the SIE, but it’s possible to see 1-2 questions on the actual exam.
As you’ve learned, they’re basically mutual funds without ongoing portfolio management. If dynamics change in the market (like we’ve seen several times just in 2020), the investments in the portfolio don’t adjust. This is the big problem investors in fixed UITs face.
Finance is a world of risks and benefits. The risks associated with a static portfolio are real, especially in a volatile market. However, the investor does not pay a management fee, which increases their return potential. In today’s world of competitive investment companies, management fees are close to all-time lows (even for actively managed funds). With increasing technological abilities and access to vast amounts of information, these funds can run themselves more cost-efficiently and still get the job done.
It’s been awhile since I’ve found an investor boasting about their returns on a fixed UIT. One day, these might become irrelevant. Thanks for commenting!