There are a astounding number of different investment products that are available to investors today. Each type comes with different risks and with these risks comes differing rewards. One can feel that in order to understand each type requires a university degree, but you can improve your odds of success by doing your homework.
You may have heard some financial advisers or institutions talk about a diversified portfolio. The thinking goes that to have different kinds of investments better protects your money and maximizes your profits. You can think of it as being a multi-legged approach to investing. One leg or kind of investment could be made up of stocks, bonds, and savings.
The second kind of investments are called commodities. Some examples of these are items such as gold, silver and oil. They can result in substantial returns but at the cost of very high risk. Usually commodities are the territory of the seasoned investors who have the ability to to closely watch the market.
Real estate is always a good investment but not everyone has the funds to go out and start buying property. For example Toronto residential real estate has an average price of well over $300,000 and commercial properties could be even more. This is where Real Estate Investment Certificates, otherwise known as REITs come into the picture.
These companies have the job of buying interests in or properties like malls, motels and hotels, office space or mortgages. REITs themselves come in different forms to suit your needs. Equity REITs are investments in property. They make money by charging rent. Going back to Toronto as an example shopping areas that have a Canadian Tire, EB Games, and an Old Navy store all leasing space from a property owner. The rents charged to tenants on these Toronto properties makes money for the REIT investors. Mortgage REITs, however, comprises of investing, or lending, of mortgage money to property owners or developers. If you don’t know which one you want you can opt to buy a hybrid REIT which is a combination of the two.
One risky kind of real estate invest is known as an option. This is simply a purchaser is making what’s known as an “option for consideration”. An offer is put forth on a property based on the fact that certain conditions will be fulfilled. During this time the property is taken off of the market in return for a small amount of money as a deposit. The risk is that if the conditions cannot be fulfilled the potential purchaser may be forced to forfeit their deposit. On the positive side the purchaser could earn a quick and substantial profit if they can quickly sell their option to a third party. To a purchaser needs to research the market thoroughly.
It may seem confusing but with a little research it will all become clear over time. Long term investing is the plan and real estate has been shown to be a great vehicle for investors and even with the many possible risks involved it is thought to be the least risky as compared to other kinds of investments. And as such it is important to include it in your investment portfolio.