Wall Street knows how to appeal to your vanity. Getting an invitation to participate in an initial public offering is just one way financial professionals try to get on your good side. By giving you a chance to invest in well-hyped new businesses, you'll feel like a member of the elite.

But for rank-and-file investors without millions of dollars to invest, the IPOs you're most likely to encounter aren't for shares of newly listed public companies. Instead, your broker may offer you the chance to get in on the ground floor of a unit investment trust. For these IPOs, however, it usually pays to wait.

The QT on UITs
Unit investment trusts combine some features of mutual funds and exchange-traded funds. Generally, UITs own a diversified assortment of stocks or bonds. They're typically sold by major brokerage firms like Morgan Stanley (NYSE:MS) or Schwab (NASDAQ:SCHW). You can buy them in $1,000 increments, making them easy for everyday investors to afford. But unlike most mutual funds, which intend to go on forever, many UITs are designed with specific ending dates in mind. The lifespan of a UIT can be as short as a year or two, or as long as several decades. Also, while many mutual funds are actively managed, the portfolio of a UIT is often fixed in advance, so that investors know exactly which stocks they're getting within the trust.

But the primary way that many professionals differentiate UITs from typical mutual funds is by touting their exclusivity. UITs typically sell only a limited number of units in their initial public offerings. After the IPO, prospective new investors have to find existing unitholders willing to sell their units on a secondary market. Many salespeople emphasize this point, stressing the value of being invited to participate.

Where your money goes
Unfortunately, you pay for the privilege of buying unit investment trusts at their IPO. For instance, I examined one UIT, the "Great International Firms Portfolio," within the Van Kampen Unit Trust Series 654. (As you can see from the series number, there's no shortage of these trusts.)

This UIT charges an initial sales fee of 1%, which doesn't sound all that bad. But it also has a deferred sales charge of as much as 3.45% more. After you include another 0.5% for a "creation and development" fee, you could end up paying almost $50 in fees for every $1,000 you invest. That's a hefty price to pay for shares of Toyota (NYSE:TM), GlaxoSmithKline (NYSE:GSK), and BHP Billiton (NYSE:BHP) -- shares you could buy yourself through a broker.

And that doesn't even include the ongoing expenses you'll pay as a unitholder. Just like mutual funds, UITs charge annual fees to cover operational expenses. In the case of this Van Kampen UIT, the fee is a relatively small 0.19%. But given that UITs aren't constantly trading shares or looking for new ways to invest their assets, these costs shouldn't be very high.

Cut your costs
It just doesn't make sense to pay a bunch of fees in order to be part of an IPO. If you really want to invest in a unit investment trust, wait until after shares become available on the secondary market. Often, those shares will trade at a discount after the IPO, since some investors will want out before the UIT terminates.

With the rise of low-cost exchange-traded funds without huge sales charges, there's little reason to go with a unit investment trust. A discount brokerage account will give you access to shares of ETFs at a fraction of the cost of a UIT, and you can buy and sell them whenever you want. For most investors, unit investment trusts are simply a way for brokerage firms to collect fee revenue.

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Fool contributor Dan Caplinger has seen plenty of clients get stuck with unit investment trusts. He doesn't own shares of companies mentioned in this article. GlaxoSmithKline is an Income Investor recommendation. Schwab is a Stock Advisor pick. The Fool's disclosure policy won't charge you an arm and a leg.