Since our recommendations this time include two REITs (and three other hopefully smart investments), we are offering for the unsophisticated a short explanation of this type asset, courtesy of Motley Fool and thanks to a clipping forwarded by Evelyn.
REITs - What are they? REITs stand for real estate investment trusts. They are a weird, somewhat hybrid, animal in the financial zoo. Folks not interested in buying actual real estate property, other than perhaps their own homes, but who wish some advantages to their portfolios of diversification into real estate assets, can buy shares of REITs. These are organizations set up, like mutual funds, to pool investors' money for asset purchases, but, instead of investing in bonds or company stocks, the assets in question are real estate properties. Investment moneys are professionally managed and spread around among a variety of real estate assets. They generally trade on the major stock exchanges in the same way that stocks do. But they have some tax advantages over the average stock, closed-end fund, or mutual fund. The managing trusts or corporations usually are not required to pay corporate income taxes and often need not pay state taxes either. Most of the income from their real estate holdings is passed on to the investors. So, their yields, or dividends, are frequently higher than would be the case for most mutual funds and stocks. Just as with stocks and mutual funds, however, they need to be evaluated before one plunks down his or her hard-earned money for them. The two cited here come well recommended and appear to have below average risk.