Indirect Investment Definition: What is an Indirect Investment? (2024)

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Indirect Investment Definition: What is an Indirect Investment? (2024)

FAQs

Indirect Investment Definition: What is an Indirect Investment? ›

A class of marketable securities. Unlike direct investments, which investors own themselves, indirect investments are made in vehicles that pool investor money to buy and sell assets. Examples of indirect investments include hedge funds, mutual funds, and unit trusts.

What is an indirect investment? ›

The purchase of securities that represent claims on other underlying securities. An indirect investment can be undertaken by purchasing the shares of an investment company. An investment company sells shares in itself to raise funds to purchase a portfolio of securities.

Which of the following is an example of an indirect investment? ›

Indirect investments include investing in mutual funds, ETFs, or other pooled investment vehicles.

Which is an example of indirect investment quizlet? ›

d) Buying stocks is an example of direct investing while buying corporate bonds is an example of indirect investing.

What is an example of indirect investment in real estate? ›

There are three key types of indirect property investments: land banking schemes, shares in property companies and real estate investment trusts (REITs). Other ways to indirectly invest in property include property funds, property investment trusts, property unit trusts, OEICs, and property authorised investment funds.

What transaction is an example of an indirect investment? ›

What transaction is an example of an indirect investment? Insurance company buys corporate debentures. [Indirect investment occurs when a person or entity with accumulated savings buys the securities issued by a government or corporation, which in turn invests the funds it receives directly for a productive purpose.

What is the difference between direct investing and indirect investment? ›

Direct investments in real estate involve controlling ownership and management of the property. Indirect investment involves owning a share of a company that owns and manages the real estate.

What are the advantages of indirect investment? ›

The Advantages of Indirect Property Investment

There is a reduced requirement for significant up-front capital expenditure. Real property acquisition often requires a significant capital deposit as part of any finance agreement. Shares on the other hand can be acquired to suit the investor's budget.

Which of the following may be considered your indirect investment? ›

Therefore, the correct answer is: Investments made by a fund that you hold, where you have no control or ability to influence the fund's investment decisions.

What are the disadvantages of indirect property investment? ›

High Taxes. One downside to indirect real estate investing is that you can't use tax write-offs for owning property. You'll also have to pay taxes on any capital gains you earn on your investment. Income taxes will be due on dividend payouts you receive from a real estate fund or stock.

Which is the best example of indirect finance? ›

Indirect Loan Examples

Auto dealerships are one of the most common businesses involved with indirect loans; in fact, some authorities even call indirect loans a type of car loan. Many consumers use dealer-financed loans for the convenience of being able to apply on-premises and to easily compare offers.

Are stocks a direct or indirect investment? ›

Investors can invest in stocks either directly or indirectly. A direct investment is made by buying and holding shares of individual stocks. An indirect investment in stocks can be made primarily through the purchase of stock mutual funds or equity-based exchange-traded funds (ETFs).

What are the indirect costs of investments? ›

Indirect costs are costs incurred by an organization that are not readily identifiable with a particular project or program but are nevertheless necessary to the operation of the organization and the performance of its programs.

What do you mean by indirect investment? ›

Indirect investment can be exemplified by the purchasing of shares in companies that specialise in property dealings, property index derivatives or the bonds of corporate property firms. The company's portfolio also includes indirect investments in generation, distribution and marketing of electricity energy.

Which of the following is an example of an indirect investment in real estate? ›

In contrast, indirect real estate investment typically means investing through real estate investment trusts (REITs) or real estate funds, offering a more hands-off approach with potential for diversification and liquidity.

Which of the following is not an example of indirect investment by a household? ›

The correct answer is d) savings deposit in a commercial bank.

What is an example of indirect finance? ›

Examples of Indirect Financing

If you have zero or bad credit, you might go to a dealer that offers special financing. Similar to the example above, the dealer also acts as the middleman by connecting you with their network of lenders, who are willing to work with car shoppers in your situation.

Why would an investor choose to invest indirectly? ›

Lower capital and diversification: Indirect investments require less capital and offer diversification benefits, reducing the overall risk to your portfolio.

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