Unit investment trusts

Q: Are unit investment trusts like mutual funds? — P.D., Winona, Minn.

A: Both are regulated and offer diversification via an assortment of stocks, bonds and other securities, but they differ, too. At the end of each trading day, mutual fund shares are issued and redeemed on demand at a specific price (the “per share net asset value”) that reflects the total market value of the fund’s holdings divided by the number of shares. The number of shares isn’t fixed; if lots of people want to buy in, the fund company will issue more shares and have more money to invest.

Unit investment trusts (UITS), in contrast, have a fixed life, debuting via a one-time public offering and ending on a specified date via liquidation. While mutual fund holdings often change a lot over time, UITS feature a relatively fixed portfolio of investments. Investors who want to trade UIT shares do so on the secondary market, where share prices may be higher or lower than the net asset value of the trust’s holdings. Learn more before investing in a UIT.

Q: Can you recommend books about how to spot bad behavior by companies in their financial reports?

— C.F., Greensburg, Pa.

A: Check out “Financial Shenanigans: How To Detect Accounting Gimmicks & Fraud in Financial Reports” by Howard M. Schilit and Jeremy Perler (Mcgrawhill, $40); “What’s Behind the Numbers? A Guide to Exposing Financial Chicanery and Avoiding Huge Losses in Your Portfolio” by John Del Vecchio and Tom Jacobs (Mcgrawhill, $36); or “Financial Intelligence: A Manager’s Guide To Knowing What the Numbers Really Mean” by Karen Berman and Joe Knight with John Case (Harvard Business Review Press, $35).