8 Secure Investments You Should Know About |
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4. Real Estate Investment Trusts, or REITs
A Real Estate Investment Trust is simply a company that invests in real estate and then sells shares of itself to investors who are rewarded with a share of earnings, depreciation, and so on. Plus, REITs are able to distribute much more of their income to shareholders because, unlike other corporations, they are not subject to traditional corporate income tax. Moreover, your position in a REIT is far more liquid than if you held the physical property.
There are REITs for every taste, so you can probably find one that appeals to your investment instincts. Again, the trick is to stick with what you know. If you live in a city where apartment rents are skyrocketing and vacancies nonexistent, for example, find a REIT that plans to build apartments there. You can do further research at the National Association of Real Estate Investment Trusts Web site. And remember, because REITs can raise rents any time they please, they offer a sound hedge against inflation. A broker should be able to send you a prospectus on the REIT of your choice.
5. Shares of Companies Involved in Markets You Understand
Many equity investors rely on the advice of experts, unaware that they themselves possess the knowledge and judgment to pick winning stocks. Again, it's a good idea to stay with what you know. Remember Victor Kiam, the guy who liked the Remington shaver so much he bought the company? You should apply the same principle, albeit on a smaller scale. You may want to begin with the industry you work in. Most likely you already know your competitors, who's on top, and who's not. Is the company's stock overpriced or a bargain? Look for low debt, good earnings, and a promising business plan.
6. Selected Utility Stocks
To locate utility stocks worth buying, look for well-run companies with the following characteristics:
- A payout ratio (the percentage of earnings paid to investors as dividends) of less than 80 percent
- A dividend yield below 8 percent, since higher yields usually accompany higher risk
- A favorable regulatory environment.
Beware of telecom and energy utilities that have risky high-tech dealings. And, look for companies with relatively little financial exposure from failed nuclear projects or other such nonrecoverable costs. Most retail brokerage houses can provide you with the information you need to evaluate these stocks.
 7. International Stocks and Funds
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