Top 12 Must-Know Different Types of Investments
5. Real Estate Investment Trusts (REITs)
REITs are companies that own, operate, or finance income-generating real estate. Investors can buy shares in a REIT, which allows them to invest in large-scale commercial properties without direct ownership.
Pros:
- Provides regular dividend income
- Diversification into real estate without owning property
- Liquidity since REITs are traded like stocks
- Tax advantages such as pass-through income
Cons:
- Dividends are taxed as ordinary income
- Vulnerable to interest rate changes
- Management fees can reduce returns
- Lack of control over the specific properties in the portfolio
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