What is a Municipal Investment Trust?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 14 August 2019
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A municipal investment trust (MIT) is type of trust that invests exclusively in different kinds of municipal securities. A trust of this type makes it possible for investors to utilize a wide range of municipal bonds to earn returns while still taking advantage of any tax breaks that may be associated with those bond issues. In many cases, a municipal investment trust offers the ability to receive monthly payouts on those earnings, as opposed to the quarterly or semiannual payments that are common with other types of investment trusts.

While there are exceptions, the typical mutual investment trust requires a minimum investment in order for investors to participate. That minimum investment is then used to purchase stakes in different bond issues that qualify under the terms of the trust. As those bonds are paid in full or earn interest on the way to maturity, the investor receives returns in the form of monthly payments. Some trusts of this type allow investors the option of re-investing the amount of those monthly payments in the trust, making it possible to slowly build a larger stream of steady income.


It is important to note that while a municipal investment trust may require a minimum investment from anyone who wishes to participate, that amount is often lower than other types of trusts or various investment vehicles. In fact, there are MITs that require an investment that is no more than the minimum amount required by some banks to open a certificate of deposit. This relatively low minimum amount, coupled with the low risk associated with municipal bonds in general and the monthly disbursements make this type of trust well worth considering.

While a municipal investment trust does provide a number of advantages, there are also a few limitations that investors should consider. Since the trust generates returns based on bond activity, those returns are not likely to be as high as with other securities that offer the potential of more lucrative returns. For investors who are looking to generate a great deal of money in a short period of time, this particular strategy is not likely to be a good fit. In contrast, an investor who is looking for an investment that can be held over the long-term, and generate steady returns with a minimum of risk will likely find that a municipal investment trust is a viable option and offers the chance to incrementally build a stream of income that can easily be diverted into other investments if desired.


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