What should clients consider when selecting UITF in relation to increasing interest rates?

When selecting a Unit Investment Trust Fund (UITF) in relation to increasing interest rates, it is essential for clients to consider their personal risk profile. This is because higher interest rates can lead to fluctuations in the value of fixed-income securities, which are often a significant component of UITFs. If a client's risk tolerance is low, they may prefer UITFs that have less exposure to interest rate risk and opt for funds with shorter duration bonds or those that invest in equities, which may perform better in a rising interest rate environment.

Understanding one’s risk profile allows clients to choose UITFs that align with their financial goals and comfort levels regarding potential losses or volatility that may arise due to changing interest rates. Conversely, focusing solely on past market performance, tax implications, or liquidity may not adequately address how interest rate changes could impact the investment's sustainability or growth. Thus, personal risk tolerance plays a crucial role in making an informed choice about UITFs during periods of increasing interest rates.