Which investment vehicle acts like mutual funds but exclusively contains bonds?

The investment vehicle that acts like mutual funds but exclusively contains bonds is the unit investment trust (UIT). UITs are structured to provide investors with a fixed portfolio of securities, which can include a variety of bonds. They function similarly to mutual funds in that they pool investors' money to purchase a diversified portfolio; however, they are different in a few key ways.

One of the primary characteristics of UITs is that they have a defined termination date and usually hold investments for a predetermined period. This structure allows investors to know precisely what bonds they will hold and when the bonds will mature, providing a predictable income stream from the interest payments. Additionally, UITs are typically passively managed and do not trade like mutual funds or exchange-traded funds (ETFs).

In contrast to UITs, exchange-traded funds (ETFs) can contain a variety of asset classes, including stocks, bonds, and commodities, and they continuously trade on exchanges throughout the trading day. Real estate investment trusts (REITs) primarily focus on real estate investments and not on fixed-income securities. Variable universal life insurance combines life insurance with an investment component but does not function as a bond-focused investment vehicle.

Thus, the unit investment trust is uniquely positioned as an