Which of the following statements is true about shares of mutual funds (MFs) and unit investment trusts (UITs)?

Shares of mutual funds (MFs) and unit investment trusts (UITs) are typically not traded on stock exchanges; rather, they are bought and sold directly through the fund or sponsor. This indicates that they operate on a different structure compared to publicly traded securities.

Mutual funds generally allow investors to purchase shares at the end of the trading day at the net asset value (NAV), and shares can be redeemed directly with the mutual fund company. Similarly, UITs have a fixed portfolio of securities and also allow shares to be redeemed with the issuer. Therefore, this illustrates that both MFs and UITs do not trade on the open market but can be redeemed by the issuer, aligning with the provided correct statement.

Understanding the mechanisms of mutual funds and UITs is crucial because it emphasizes their unique characteristics compared to other investment vehicles like exchange-traded funds (ETFs) or closed-end funds, which do trade on exchanges.