Real Estate - A Must in Any Investment Portfolio By Stefan Hyross At Isnare.com Ezine Articles

The number and variety of investment products that are accessible today is staggering and to the average investor, attempting to understand which one is right for you can be a tough task. There are various risks and rewards that go along with each one. One can feel that in order to understand each product requires an advanced degree, but you can improve your odds of success by doing your research.

You may have heard some investment advisers or institutions talk about a diversified portfolio. Having different types of investments instead of just one type helps to protect your money by diluting the risk. You can think of it in terms of being a multi-legged approach to investing. One prong or type of investment may be composed of stocks, bonds, and savings.

Commodities make up the second type of investment product. These are goods such as oil, gold and silver. They can result in substantial returns but at the cost of very high risk. Commodities are usually left to the experienced investor who has time to closely watch the market because they are very volatile.

Real estate has traditionally been a solid investment but not everyone has the funds to go out and start buying property. To apply the Toronto residential real estate market as an example the average cost of a home is over $300,000 with commercial properties being even more. This is where Real Estate Investment Certificates, or REITs come into play.

These are entities that go out and buy property or interests in hotels, office buildings, shopping malls and even mortgages. REITs themselves come in various forms to suit your investment style. REITs that are invested in physical real estate are called Equity REITs. The rents that are charged generate income. To use Toronto as an example again you may have shopping centers with a Wal-mart, Home Depot, Payless shoes etc. that are all leasing buildings from the property owners. All together these Toronto properties are all generating income from rents for the REIT and its investors. Mortgage REITs, however, comprises of investing, or lending, of mortgage money to property owners or developers. If you can't decide which one you prefer you can choose to get a hybrid REIT which is a combination of the two.

One risky type of real estate invest is known as an option. This is simply a buyer is making what's known as an "option for consideration". The option entails an offer to buy real estate if certain conditions are fulfilled such as financing or inspections. During this period the property is taken off of the market in return for a small amount of money as a deposit. This can be risky because the buyer may be forced to forfeit their deposit if the conditions are not fulfilled. On the upside the buyer could earn a quick and substantial profit if they can quickly sell their option to a third party. To do this right a buyer needs to research the market thoroughly.

It can be confusing at times but the more you know the better off you will be. Long term investing is the key and real estate has proven to be a good vehicle for investors and even with the many possible risks involved it is considered to be the least risky when set side by side with other types of investments. And as such it is vital to include it in your investment portfolio.

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