Direct investments are those in which the investor owns the particular assets himself, while indirect investments are investments made in vehicles that pool investor money to buy or sell assets, according to Red Mountain Asset Research. A direct investor invests in the asset itself, whereas an indirect investor invests in the expertise of the people using his investment money, notes the National Association of Real Estate Investment Trusts.Continue Reading
A direct investor is wholly responsible for the asset, has control over it, reaps all of the rewards and assumes all of the risks, according to Property24.com. Indirect investors let others buy and sell the assets, while assuming no ownership of the assets and taking no responsibility for them, reaping only a share of any profits that are distributed among all of the indirect investors.
Examples of indirect investments are mutual funds, pension funds and 401(k) plans, explains CNN Money. They can also be REITs, which are real estate investment trusts. An REIT could use investor money to buy large commercial properties such as malls, office buildings and hotels. An example of a direct investment would be owning a house and acting as a landlord or hiring a property manager, being responsible for upkeep and taxes, keeping all of the rent collected and assuming all of the gains or losses when the property sells.Learn more about Investing
An investor in the stock market typically makes money when a stock he owns increases in price and when a company whose stocks he is holding issues a dividend. When a stock price rises, the investor only makes money if he sells the stock; otherwise, he remains with unrealized gains. A stock price typically increases because other investors believe it has a higher value than its current price.Full Answer >
Hedge funds are a type of investment partnership in which the investor contributes money and the general partner manages the funds, according to Forbes. Hedge funds are intended to optimize the investor's return, while reducing overall risk. There can be multiple investors for a single hedge fund.Full Answer >
An angel investor is a wealthy person who is willing to invest his or her money in a start-up company to become one of the owners. Angel funding helps to fill the gap between the money an entrepreneur has collected and the venture capital he or she hopes to get.Full Answer >
As of 2015, risks associated with the Dodge & Cox stock fund include the fund underperforming other investments, investors losing money by investing in the fund, and fund managers making untimely sales or purchases of fund securities, states Dodge & Cox. Fluctuating market prices also create risk.Full Answer >