What are some types of growth-oriented investments in addition to company stock?

Personal Finance February 27, 2013 Print Friendly and PDF

Below is a description of several common growth-oriented investments:

• Real estate investment trusts (REITs) and real estate limited partnerships provide indirect ownership of real estate, as opposed to direct ownership of land or property. REITs trade like stock on major stock market exchanges and are diversified, professionally managed portfolios of real estate investments (e.g., office buildings, shopping centers, and apartment complexes). Real estate limited partnerships are available through brokers. A general partner oversees the partnership’s real estate assets, and investors share proportionately in partnership gains or losses.

• Growth (equity) mutual funds are mutual funds that invest in stocks and other growth-oriented assets. Like all mutual funds, they consist of a professionally managed portfolio. The average equity mutual fund contains about 130 different stocks. Some, like funds that track the Standard & Poor’s 500 Index, contain almost four times more than that number and are very well diversified. Costs to purchase equity mutual funds vary. The minimum amount required to open an account is set by an individual fund and described in a mutual fund’s prospectus.

• Collectibles is another type of growth-oriented ownership asset. You can collect almost anything, such as art, classic cars, toys, and books. To be financially successful, knowledge is needed about types of collectibles and factors that affect their value. Items must be properly cared for and insured and may require ongoing maintenance. To make money with collectibles, generally you cannot use or handle them regularly, and they may need protective storage. Be sure you buy a collectible for its true value and not for the pleasure you get from an item. Keep an appraisal of the value, and purchase insurance as needed.When you decide to sell, you may have to wait a while and/or pay someone else to find a buyer. There is no regular or periodic income from collectibles. You need to sell them to realize a profit.

In summary, equity investing includes buying stocks, stock mutual funds, real estate, and collectibles. The primary objective is capital appreciation, which can occur if the value of a particular equity investment increases. In addition, some equity investments may produce regular income such as rent from apartment buildings and dividends from REITs or equity mutual funds.

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This work is supported by the USDA National Institute of Food and Agriculture, New Technologies for Ag Extension project.