Other Assets





Kerry Back

Real Estate


Many people have substantial real estate investments via home ownership or perhaps owning rental properties.

It is also possible to invest in real estate in the stock market via REITS (real estate investment trusts).

REITs

  • Equity REITs
    • Own or manage properties
    • More than $3 trillion of U.S. real estate
  • Mortgage REITs
  • REIT ETFs

Commodities


Metals - gold, silver, \(\ldots\)


Energy - crude oil, natural gas, \(\ldots\)


Agriculture - corn, wheat, \(\ldots\)

Investing in commodities

  • Futures contracts
  • Managed futures fund
  • ETFs

Futures Contracts

  • A futures contract is a commitment to buy/sell in the future at a pre-determined price (the futures price).
  • The futures price is determined in the market.
  • People who buy the futures make a profit when the futures price goes up.
  • People who sell it make a profit when the futures price falls.

Example

In July, you buy a soybean contract on the CME (Chicago Mercantile Exchange) for November delivery at a price of $15 per bushel.

A contract is for 5,000 bushels.

  • Suppose the price of the November contract rises to $17 in August and you sell the contract.
  • You made $17 - $15 = $2 per bushel on 5,000 bushels = $10,000.
  • You don’t have to take delivery of the soybeans!

Managed Futures

  • Managed futures funds buy and sell contracts based on market conditions and their projections of the market.

  • Usually the strategies are based on price momentum, hoping to ride price waves up or down.

  • If you invest in a managed futures fund, you are really investing in traders, not in commodities.

Commodity ETFs

  • Some commodity ETFs own the commodity – for example, some gold funds.
  • Others – for example, oil funds – hold futures contracts (they buy the futures so they profit if the futures price increases).

Currencies



You can invest in foreign currencies by buying futures contracts or through an ETF.

You can also bet on the dollar by betting against foreign currencies. “Dollar bullish” ETFs are bets on the dollar.