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Buying the stock by name or buying shares in a company or investing in shares directly though broker/subbroker is called direct investment.
Buying a mutual fund (having the same stock in its portfolio) is an indirect investment.
Indirect investing refers to a way of investing in real state without actually investing in the property. Indirect investment can be done in many ways, including securities, funds, or private equity. Most investors interested in indirect investment would do so through a company or advisor who has experience in this type of investing.Direct investment refers to an investment which is sufficiently large to affect a company's subsequent decisions This is sometimes a majority ownership, but sometimes it's just a significant minority ownerships.
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.
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.
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The main difference between direct and indirect investment is that with direct investment, you purchase the asset itself, while with indirect investment, you purchase a security that represents ownership in the asset. For example, investing directly in corn would involve buying actual bushels of corn, while indirectly investing would mean purchasing a corn futures contract. This allows exposure to corn prices without needing physical delivery. Speaking of commodities, I recently learned about how to trade commodities which explains how to trade things like metals, agriculture, and energy as CFDs. The site had helpful info for beginners interested in diversifying into alternative assets beyond just stocks and bonds. Their trading guides break down commodity characteristics that impact pricing so you can make informed decisions.
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