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- About Us

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• Glossary
• Información en Español
  
  - Introduction to Investing - Getting Started - Five Questions to Ask Before You Invest
• Understanding Fees
• Asset Allocation
• Assessing Your Risk Tolerance
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  1. Home.

2. Introduction to Investing.
3. Investment Products
   
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   - Save and Invest - Define Your Goals.

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  - How to Submit Comments to the SEC.
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  Real Estate Investment Trusts (REITs)
  
  What are REITs?
  
  Real estate financial investment trusts (" REITs") enable individuals to buy large-scale, income-producing realty. A REIT is a business that owns and typically runs income-producing property or related assets. These might consist of office complex, shopping malls, homes, hotels, resorts, self-storage centers, warehouses, and mortgages or loans. Unlike other genuine estate business, a REIT does not develop realty residential or commercial properties to resell them. Instead, a REIT purchases and develops residential or commercial properties primarily to operate them as part of its own investment portfolio.
  
  Why would somebody buy REITs?
  
  REITs offer a method for private financiers to earn a share of the through commercial realty ownership - without in fact having to go out and buy commercial realty.
  
  What types of REITs exist?
  
  Many REITs are signed up with the SEC and are publicly traded on a stock exchange. These are understood as openly traded REITs. Others may be registered with the SEC but are not publicly traded. These are referred to as non- traded REITs (likewise called non-exchange traded REITs). This is among the most crucial differences amongst the different kinds of REITs. Before investing in a REIT, you need to comprehend whether it is publicly traded, and how this could affect the benefits and dangers to you.
  
  What are the advantages and risks of REITs?
  
  REITs offer a method to consist of real estate in one's investment portfolio. Additionally, some REITs may provide higher dividend yields than some other investments.
  
  But there are some risks, especially with non-exchange traded REITs. Because they do not trade on a stock market, non-traded REITs include unique risks:
  
  Lack of Liquidity: Non-traded REITs are illiquid investments. They typically can not be offered easily on the free market. If you need to sell a possession to raise money quickly, you might not have the ability to do so with shares of a non-traded REIT. Share Value Transparency: While the market cost of an openly traded REIT is readily available, it can be challenging to determine the worth of a share of a non-traded REIT. Non-traded REITs usually do not provide an estimate of their worth per share till 18 months after their offering closes. This might be years after you have made your investment. As a result, for a significant time duration you may be unable to assess the value of your non-traded REIT investment and its volatility. Distributions May Be Paid from Offering Proceeds and Borrowings: Investors may be brought in to non-traded REITs by their relatively high dividend yields compared to those of openly traded REITs. Unlike publicly traded REITs, nevertheless, non-traded REITs often pay circulations in excess of their funds from operations. To do so, they might use providing earnings and borrowings. This practice, which is generally not used by openly traded REITs, minimizes the worth of the shares and the money readily available to the company to purchase extra possessions. Conflicts of Interest: Non-traded REITs generally have an external supervisor instead of their own workers. This can cause possible conflicts of interests with investors. For example, the REIT might pay the external manager significant fees based on the quantity of residential or commercial property acquisitions and possessions under management. These cost incentives might not always line up with the interests of shareholders.
  
  How to buy and sell REITs
  
  You can buy an openly traded REIT, which is noted on a significant stock market, by acquiring shares through a broker. You can purchase shares of a non-traded REIT through a broker that takes part in the non-traded REIT's offering. You can also buy shares in a REIT shared fund or REIT exchange-traded fund.
  
  Understanding fees and taxes
  
  Publicly traded REITs can be purchased through a broker. Generally, you can acquire the common stock, chosen stock, or financial obligation security of an openly traded REIT. Brokerage charges will apply.
  
  Non-traded REITs are typically offered by a broker or monetary adviser. Non-traded REITs normally have high up-front charges. Sales commissions and in advance offering charges typically amount to around 9 to 10 percent of the investment. These expenses lower the worth of the investment by a substantial amount.
  
  Special Tax Considerations
  
  Most REITS pay out a minimum of 100 percent of their taxable income to their investors. The shareholders of a REIT are accountable for paying taxes on the dividends and any capital gains they get in connection with their financial investment in the REIT. Dividends paid by REITs generally are dealt with as common income and are not entitled to the reduced tax rates on other kinds of corporate dividends. Consider consulting your tax adviser before buying REITs.
  
  Avoiding fraud
  
  Watch out for any person who tries to offer REITs that are not registered with the SEC.
  
  You can verify the registration of both openly traded and non-traded REITs through the SEC's EDGAR system. You can also utilize EDGAR to review a REIT's annual and quarterly reports along with any offering prospectus. For more on how to utilize EDGAR, please go to Research Public Companies.
  
  You should also have a look at the broker or investment advisor who recommends buying a REIT. To discover how to do so, please see Dealing with Brokers and Investment Advisers.
  
  Additional details
  
  SEC Investor Bulletin: Real Estate Investment Trusts (REITs)
  
  FINRA Investor Alert: Public Non-Traded REITs - Perform a Careful Review Before Investing
  
  Featured Content
  
  School's Out, Investing for Your Future Is In!
  
  Now is a good time for college trainees and recent graduates to start considering saving and investing.
  
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