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 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.

Which one of the following would be considered for indirect investment? ›

1 Approved Answer

Investments made by a fund that you hold, where you have no control or ability to influence the fund's investment decisions. Explanation: In this scenario, your investment is channeled through a fund, and you do not have direct control over the fund's investment decisions.

What are direct and indirect investments in real estate? ›

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 is the importance 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.

What is the other name of indirect investment? ›

This type of investment is also sometimes referred to as a foreign portfolio investment (FPI). Indirect investments include not only equity instruments such as stocks, but also debt instruments such as bonds.

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

The correct answer is d) savings deposit in a commercial bank. This is actually an example of direct savings, rather than investment. All the other options are indirect investments because they are not directly providing any returns.

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

Another form of indirect investing is a real estate investment trust (REIT)—a mutual fund of real estate holdings. You buy shares in the REIT, which may be privately held or publicly traded on an exchange. The REIT is a fund invested in various commercial properties.

Which situation is an example of indirect financing? ›

Indirect Financing- Indirect finance occurs when you deal with loan packages through a third-party lender. Usually, after you've finished shopping for your vehicle, you'll apply for financing at the dealership and get a variety of loan options.

Which of the following is considered an indirect cost? ›

Indirect costs include supplies, utilities, office equipment rental, desktop computers and cell phones. Much like direct costs, indirect costs can be fixed or variable.

What is indirect cost of investment? ›

Indirect costs can include performance fees, investment-related legal, accounting, auditing and other operational and compliance costs The aggregation of these indirect costs are divided by the average net asset (this being the size) of the fund and presented as a percentage.

Are stocks an indirect investment? ›

Holding shares of stock this way is known as direct stock ownership. And while buying stocks individually is definitely one way to invest, it's not the only way. Many people invest in the stock market primarily through mutual funds and/or exchange-traded funds (ETFs) This gives them indirect stock ownership.

What are four examples of indirect investments in real estate? ›

Mutual funds, exchange-traded funds (ETFs), real estate investment trusts (REITs), hedge funds, and private equity funds are all examples of vehicles that is used to engage in indirect investment.

What does indirect investment mean in real estate? ›

What is indirect real estate investing? Indirect real estate investing typically involves buying shares in a fund or a publicly or privately held company. One of the common first steps for investors is to buy shares of non-traded or publicly-traded real estate investment trust (REIT) stocks.

What are the disadvantages of indirect property investment? ›

The Cons of Indirect Investing

You must pay income tax on dividend returns, and capital gains tax also applies. No control over where the money goes: With indirect real estate investments, you have no control over which specific properties you can invest in.

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 is an example of an indirect form of funding? ›

Common methods for indirect financing include a financial auction (where price of the security is bid upon) or an initial public offering (where the security is sold for a set initial price). By allowing borrowers to obtain financing through a third party, inderect financing can improve risk management and liquidity.

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