1. Investing in Non-financial Assets: Collectibles,Resources, and
Chapter 23
Investing in Non-financial Assets: Collectibles,Resources, and
Real Estate

2. Important General Considerations
Source of returns primarily possible price appreciation
Risks
usual investment risks
additional risks such as possibility of fraud or theft

3. Marketability Lack of liquidity Poorly developed secondary markets
Role of dealers and auctions

4. Illustrations of Collectibles
Art
Oriental rugs
Antiques

5. Investing in Gold Gold coins Gold bullion Mining stocks
Specialized mutual funds
Gold futures and options

6. Investing in Natural Resources
Owning the resource (e.g. a tree farm)
essentially is running a business
Importance of cash flow
Supervision - active management is required

7. Alternative Means to Invest in Natural Resources
Partnerships
Stocks in resource companies

8. Importance of the Price Response
Inelasticity of supply

9. Real Estate Home ownership Potential price appreciation
Tax benefits of home ownership

10. Mortgages Conventional mortgages loans
Adjustable-rate mortgages (ARMs)
Renegotiable mortgages
Graduated-payment mortgages
Role of the FHA and VA

11. Land and Properties Revenues Minus operating expenses depreciation
interest
taxes
Equals net income

12. Cash Flow Earnings plus non-cash expenses
Possible to operate at a loss but generate cash

13. Real Estate Investment Trusts (REITs)
A specialized investment company
Equity trust - owns properties
Mortgage trust - holds mortgages
Cash flow may be distributed to stockholders