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Investing Basics – REITs and Stocks


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REITs

 

Real estate investment trusts (“REITs”) allow individuals to invest in large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or related assets. These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Unlike other real estate companies, a REIT does not develop real estate properties to resell them. Instead, a REIT buys and develops properties primarily to operate them as part of its own investment portfolio.

 

REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership – without actually having to go out and buy commercial real estate.

 

Types of REITs

 

Many REITs are registered with the SEC and are publicly traded on a stock exchange. These are known as publicly traded REITs. Others may be registered with the SEC but are not publicly traded. These are known as non- traded REITs (also known as non-exchange traded REITs). This is one of the most important distinctions among the various kinds of REITs. Before investing in a REIT, you should understand whether or not it is publicly traded, and how this could affect the benefits and risks to you.

 

Stocks

 

Stocks are a type of security that gives stockholders a share of ownership in a company. Stocks also are called “equities.”
Investors buy stocks for various reasons including

 

  • Capital appreciation, which occurs when a stock rises in price
  • Dividend payments, which come when the company distributes some of its earnings to stockholders
  • Ability to vote shares and influence the company

 

Companies issue stock to get money for various things, which may include:

 

  • Paying off debt
  • Launching new products
  • Expanding into new markets or regions
  • Enlarging facilities or building new ones

 

Types of stocks

 

There are two main kinds of stocks, common stock and preferred stock. Common stock entitles owners to vote at shareholder meetings and receive dividends. Preferred stockholders usually don’t have voting rights but they receive dividend payments before common stockholders do, and have priority over common stockholders if the company goes bankrupt and its assets are liquidated.

 


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Additional information can be found at investor.gov

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