What is the difference between "owned investing" and "loaned investing?"

MkStfnz, I'm not 100% sure as I've never heard it referred to as that, but I'm thinking that the "loaned investing" is when you loan money to others for interest. "Owned investing" is when you purchase something (i.e. real estate, stocks, etc.) where you get a return on your investment (in most cases, anyway).

Check this site for some information concerning investing. The information is "Investments for Beginners" - about half way down the page, you will see information on the four basic types of investments.

MkStfnz

The difference between owner and loaner investments is in how you make your money.

Loaner investments are when you literally loan your money out. This is done through putting it in bank accounts (ie savings, money markets) or through buying bonds (gov't issue or corporate). You make your money through the interest paid on the loans, and the investments are extremely low risk. A savings account is virtually no risk, as is a T-bill.

Owner investments are when you purchase part (or all) of the investment. Prime examples of these are purchasing stocks or real estate. You make your money on these when they appreciate (increase) in value and/or when they pay dividends. These range from fairly low risk to insane-what-are-you-thinking risk (ie "futures", when you buy a share of something, say a crop, that doesn't even exist yet, in the hopes that it will not only exist one day but be worth more than you paid. May as well play Lotto).

Loanerships are stable and secure, but have very low growth. Ownerships are more risky (though it can be a very little bit more) but grow more. Of course, the more risk, the more opportunity for growth (and loss).

Which is best? It depends on many variables, but mostly on the length of time you intend to invest, if you have a lump sum vrs. dollar cost averaging, and what you intend the money for. Someone in their late 20s to early 30s investing for retirement will want mostly ownership and very little loanership. Someone in their mid-50s will want the opposite. In general, the risk you take should vary inversely with your age (if investing for retirement).

Finally, there are mutual funds, which are managed blends of ownership and loanership. Basically, you are buying shares of an investment that is comprised of shares of other investments. You can pick and choose to find one that fits your needs, ranging from nearly zero risk and completely managed to very high risk and not managed at all.

I hope this helps and if you have more questions, please feel free to ask (I can answer in here now! )

This message has been edited. Last edited by: Karrow,