Investments have a tendency to develop new meanings and ways of usage over time. This is certainly true of unit investment trusts. Still considered the bastion of conservative ventures, they are adding diversity to the mix.

In investing, as in horseracing, "there are horses for courses," and it's critical that the selections you make from the vast array of investment vehicles match your disposition as well as your income.

If you want an investment that will mature at a specific point in time, and if you also " really want to know exactly what you're buying and what the rate of return is going to be," then you should look into unit investment trusts (UITs) says Jack Tierney, UIT product manager at Van Kampen American Capital Company of Oakbrook Terrace, Illinois.

Securities firms create a UIT by buying a group of securities, putting them into a trust, and selling investors an interest in that trust. In contrast to a mutual fund, the contents of a UIT portfolio are not traded but rather remain intact for a specific period of time, at which point the bonds in the trust mature or the shares of stock are all sold.

If you're interested in municipal bonds, you have three ways of investing in them: by purchasing individual bonds from a broker, buying shares in a municipal bond mutual fund, or buying UIT shares. Why choose a UIT?

Susan Carr, a UIT portfolio manager and vice president at Nuveen Institutional Advisory Corporation in Chicago, says, "first of all, you go to a UIT for diversification." You shouldn't take the risk of owning just one municipal bond, but since the minimum cost of a single municipal bond is $5,000, you would need a bundle of money to set up a truly diversified muni portfolio, whereas a $1,000 investment in a UIT will get you exposed to a dozen or more.

In addition, Carr says, "we offer professional selection; we have a staff of research analysts or portfolio managers who work together to provide a top-quality portfolio." And she adds, "UITs also offer a lot of conveniences; we collect and disperse the income from the securities and keep the securities safe and offer immediate liquidity should the investor decide to redeem the units prior to maturity.

Mutual funds, of course , do all this, too, so why pick UITs? Our reason is the precision of the investment. In contrast to mutual funds, where you're betting on the manager's acumen in picking investments, in a UIT you know in advance exactly which securities will be in a portfolio, so "You can pick and choose the precise spot on the yield curve where you'd like to be," says Carr. Moreover, while mutual funds go on in perpetuity, with a UIT, you can also pick the time at which your principal is returned to you, matching some major need for cash, like your child's first collage tuition payment.

"The people who buy UITs are essentially conservative investors," says Stanley L. Craig, the national sales and marketing manager for defined asset funds at Merrill Lynch & Company. "They want to be able to look inside a UIT portfolio and know exactly what they're buying. For those interested in income, UITs are one of the few types of investments where you know the exact amount of the check you're going to be getting."

While UITs were originally associated primarily with bonds, Craig says, "The UIT industry has changed dramatically over the last five years. Five years ago, nearly all UITs were in municipal bonds, but today, 70 percent of our industry is in assets other than municipal bonds," principally equities and corporate bonds. The reason for this "fundamental shift," he says, is that, as interest rates have declined, investors have been looking for higher rates of return. "That's made them seek out equities, as has the bull market in stocks for the last five years," says Craig, adding that investors "have been attracted by the growing range of innovative UIT products and choices."

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The belief that UITs are illiquid is a myth. They are as liquid as mutual funds. Every day a price is established and the securities are marked to market. UIT shares can be sold at that day's net asset value just like mutual funds and without paying brokerage fees.

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The third is a unique group composed of five leading national retail brokerage firms: Merrill Lynch, Dean Witter, PaineWebber, Prudential Securities, and Smith Barney. "The syndicate," as this group is somewhat ominously called, competes on other products but joins in sponsoring a wide range of UITs. There are other sponsors, including Nike Securities and Glickenhaus, which specializes in tax-exempt New York securities. UITs are not sold by their sponsoring firms but by other investment vendors.

UITs offer a variety if bond packages, including municipals bonds issued in a single state and designed to maximize the tax advantages for purchasers from that state. For those interested in equities, there are three broad categories of UITs offered by the syndicate headed by Merrill Lynch.

According to Ken Barbuscio, vice president and syndicate manager in the defined asset funds at Merrill Lynch, the largest equity category is the "select" series, which includes UITs that buy the 10 highest yielding stocks in the Dow-Jones Industrial Average and hold those shares for a year. At year's end, the investors have the option of cashing in their investments or rolling their holdings over into a new portfolio with what are then the 10 highest yielding stocks in the Dow. "Buying undervalued stocks is a time-tested strategy," notes Barbuscio. "The higher the yield, the more out of favor a stock may be; that's a classic value investing approach."

A second group of equity UITs consists of the "concept series," which concentrates on stocks in specific sectors of the economy, such as telecommunications or high tech. These portfolios typically consist of 20-40 stocks, and "the concept series usually has a four-year life," Barbuscio says. The "concept" is that the investor thinks he or she knows which economic sector is going to outperform the market and wants a diversified but unchanging exposure to that sector.

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The third group is long-term trusts. These may invest in utilities, the Standard & Poor's 500 index, or other groups of shares. These UITs have finite lives, but there're often measured in decades.

In contrast to mutual funds, the income generated by a UIT can't be reinvested in the pool. Investors can elect to receive income and principal repayments as they are generated -- that's one reason why UITs are useful for retirees. But this cash can also be automatically invested in a mutual fund associated with the UIT's sponsor.

There are two traditional objections raised to UITs: costs and liquidity. Regarding the costs, Merrill Lynch's Craig says, "Let's say you pay a 4.5 percent fee up-front for a municipal bond portfolio with a 15-year maturity. That, plus some small expenses, is all you are going to be charged, unlike mutual funds that may charge you three-quarters of 1 percent every year for a management fee." A UIT held for more that five years will end up being less expensive that a no-load mutual fund in terms of fees, Craig argues.

As for selling before maturity, Craig acknowledges that "many people seem to feel UITs are illiquid," but he says that's "a myth." "UITs are as liquid as mutual funds," says Van Kampen's Tierney. "There is a price established every day. The securities are marked to market, and you can sell your shares at today's net asset value just like a mutual fund and without paying any brokerage fee." "At Nuveen," Carr says, "we maintain a ready market for our municipal bond investment trusts so they can easily be sold, which is not always the case with municipals bonds themselves."

UITs once had a reputation of being run by and for investment fuddy-duddies, but all that has changed. The expanding range of products has made UITs au courant. For those who want their investments to be a blend of fine ingredients, but who also want to approve everything that goes into that blend, UITs are an effective way of getting the mix you want.

Reprint permission HEMISPHERES, the inflight magazine of United Airlines, Pace Communications, Inc. Greensboro, NC.