Home > Glossary > Direct Investment
Direct Investment
Categories: Stocks,
You can make a direct investment in a company's stock through dividend reinvestment plans (DRIPs) and direct purchase plans (DPPs). If a company in which you own stock offers a DRIP, you have the opportunity to re-invest cash dividends and capital gains distributions in more stock automatically each time they are paid. In the case of DPPs, also known as direct stock purchase plans (DSPs), companies can sell their stock directly to investors without using a brokerage firm as intermediary.Direct investment also refers to long-term investments in limited partnerships that invest in real estate, leased equipment, and energy exploration and development. In this type of investment, you become part owner of the hard assets of the enterprise.You realize income from your investment by receiving a portion of the business's profits, for example, from rents, contractual leasing payments, or oil sales. In some cases you realize capital gains at the end of the investment term, if the business sells its assets.These DPPs are largely nontraded and have no formal secondary markets. This means you will often have to hold the investment for terms of eight years or more, with no guarantee that any of the income or capital gains will materialize. Many people make direct investments because there can be significant tax benefits, such as tax deferral and tax abatement, depending on the investment.
Featured term of the day
Definition / Meaning of
Dollar-weighted Rate Of Return
Categories: Accounting, Investing and Trading,
The rate of return that would make the present value of future cash flows plus the final market value of an investment or business opportunity equal the current market price of the investment or opportunity; in other words, the rate of return at which the net present value of the project is zero. If the internal rate of return exceeds the cost of financing the project, then the project is viable. The internal rate of return is also useful in ranking competing investment projects (the higher the internal rate of return, the better the project is), but there are some limitations with this technique. First, if cash flows change from negative or positive, or vice versa, a unique internal rate of return cannot be calculated, Second, in the case that competing projects are being considered, the internal rate of return criteria sometimes gives a different ranking than the net present value criteria. Thus, net present value is usually preferred over internal rate of return, since net present value is a specific number and is usually easier to calculate. also called dollar-weighted rate of return.
Most popular terms
1. Custodial Account2. Increase
3. Passively Managed
4. Risk Manager
5. NASD
6. Family Of Funds
7. Employee Retirement Income Security Act Section 510
8. Option Backdating
9. Mortgage Impairment Insurance
10. Motor Vehicle
Search a term
Browse by alphabet
A | B | C | D | E | F | G |
H | I | J | K | L | M | N |
O | P | Q | R | S | T | U |
V | W | X | Y | Z | # |
Browse by category
AccountingBanking
Bankruptcy Assistance
Bonds and Treasuries
Brokerages
Business and Management
Compliance and Governance
Credit and Debt
E-commerce
Economics
Estate Planning
Forex
Fraud
Fundamental Analysis
Futures
Global
Insurance
International Trade
Investing and Trading
Ipos
Legal
Loan and Mortgage
Mergers and Acquisitions
Mutual Funds
Operation and Production
Options
Patent
Personnel Management
Real Estate
Retirement and Pension
Statistics and Risk Management
Stocks
Strategies
Tax
Technical Analysis
Venture Capital