Finance and Market , short essay question Example | Topics and Well Written Essays - 8500 words

Finance and Market , short question - Essay ExampleFor the purpose of this study, we dwell on the advantages and disadvantages of the diversification of REITs holdings activities as opposed to the focused approach. Advantages Wider Market Cover When a REIT agency registers to venture into specific atomic number 18as, there is an aspect of additional market cover. REIT can thencece conduct a number of projects which essentially maximize its potential. This in the broader picture implies additional return on investment and maximizes the proportions of dividends that the shareholders gain in the REIT investment. This is not usually the practical case of REITs business that is restricted to specific line of corporeal dry land development. If REITs companies have specifications to operate in restricted lines of business, they cannot later on dramatize to more openings and business opportunities. In a diversified perspective however, REITs have to enjoy a dynamic market characterize d by a wide wrap of business opportunities than maintenance of an ordinary real estate portfolio. Dynamism and Innovations Secondly, diversification have in the past enabled RETs to introduce and practice innovative ideas in the real estate properties without the risks of exceeding the limits of operation as stated in the description of the real estate portfolio. ... This approach provides opportunities for to enable the REITs to practice real estate flip which the enables upcoming potential real estate investors to get sufficient exposure to real estate property business without necessarily fulfilling the huge amounts of capital commitment. In the swap, REITs enjoy unlimited exposure to real estate and have the ability to change their capital equity and bonds without restrictions or regulations. This means that REITs sources of revenue will then not be limited to interests, but also bonds, equity and commodities. With the inclusion of the international diversification in Real Est ate, there is a low correlativity with interest rates than with bonds and equities. The scale of International diversification in real estate investment securities exposes REITs to minimal risk compared to the focus on equities and bonds. Disadvantages High tax REITs occupy larger portfolios in real estate trading and this attracts more taxes due to the statutory consideration of the return on investment. The wider the portfolio a real estate maintains, the larger the taxation that is applied. This is a great and inevitable challenge which incidentally is not negotiable. Risks of Over-Commitment Secondly, REITS face blue risks of over-committing capital equity into long term investments whose returns are not guaranteed. This is a high risk that either leads to the extreme results, either too high losses or extremely high returns. To realize high returns in this case requires REITs to conduct systematic studies of the contemporary market risks. Divergence of focus The third disadv antage that REITs get exposure to in the diversified