Extending Chapter 11: Alternative Investments

What You'll Do and Learn

• You'll extend your knowledge of market indexes and how they are used in assessing the performance of mutual fund investments.
• You'll learn about Standard & Poor's REIT Composite index.

Introduction

In this activity you will learn about using indexes (or indices) to gauge the historical performance of a given type of investment.

Chapter Notes

Chapter 11 introduced several alternative investments that can help you diversify your portfolio. Investments in real estate may include direct ownership of residential homes and apartment buildings, real estate syndicates or limited partnerships, and real estate investment trusts (REITs). Real estate investment trusts are pooled investments, similar to mutual funds, which purchase commercial and residential real estate properties. They are a convenient and inexpensive way to invest in a professionally managed group of income-producing properties.

Three different types of REITs are equity, mortgage, and hybrid. An equity REIT invests in developed properties such as offices, apartment buildings, and golf courses. A mortgage REIT invests in construction loans and mortgages on developed properties. A hybrid REIT invests in both properties and mortgages.

An index is a market indicator that measures the change in value of a group of investments. The Dow Jones Industrial Average and the Standard & Poor's 500 Stock Index are examples of stock indexes. The S&P REIT index represents the performances of a group of equity, mortgage, and hybrid REITs. You can use a REIT index to evaluate the past performance of real estate investments in general and to assess the performance record of an individual REIT.

Site Notes

The Standard & Poor's Global Web site includes S&P Global Indices as well as international and US stock indexes and the S&P Composite index. (Standard & Poor's uses "indices," which is an older way of pluralizing the word "index.") Detailed information about the composition of each index is provided through links on the left side of the main page. At the top of this main page are links to current index values as well as historical performance information.

Let Me Try

Go to the S&P Global Web site at http://www.spglobal.com and then print the Worksheet activity.

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