F. Guaranteed Investment Contracts (GICs)/
Stable Value Funds: Guaranteed Investment Contracts (GICs)/Stable Value Funds: Guaranteed Investment Contracts (GICs)/Stable Value Funds: GICS are a fixed income investment that is the obligation of a life insurance company issued through its general account (the company's portfolio of bonds in which all incoming funds are in vested and which is used to satisfy insurance and retirement liabilities) and providing a fixed rate of return and set maturity. The product's creditworthiness is a function of the general account's asset quality. They are quite simply a portfolio of intermediate term bonds with an insurance 'wrapper'. Insurance companies issue these products for retirement plans as a more yield attractive alternative to a money market fund. Those issued to qualified retirement plans by life insurers are exempt from registration as a security with the United States Securities and Exchange Commission. The traditional GIC was a bullet maturity product with little or no opportunity for withdrawal of assets. While GICs have not disappeared completely, more common in recent years is the stable value fund. A stable value fund is a blend of GICs, money market securities and other book-value instruments offering diversification amongst insurers, stability of principal and a competitive yield. These products reside in tax-deferred accounts, distributions from which are taxed as ordinary income.

G. Real Estate: real estate is a separate asset class and important portfolio diversifier as it is highly correlated with inflation and acts as a hedge against it.

  1. Investor-Managed (real property): this entails direct investment in property, be it commercial or residential. Particular expertise in property management and the dynamics of the local market are essential. Such an endeavor is rather time consuming and requires typically a sizable initial investment.
  2. Real Estate Investment Trusts (REITs-securitized): this is a specialized type of company that manages a real estate portfolio and which is publicly traded. REITS pay shareholders dividends from income and capital gains distributions. Organized as a trust, REITs avoid corporate taxation if they invest 75% or more of their assets in real estate and receive 75% or more of their income from real estate. They must distribute 90% or more of their net investment income to shareholders. Additionally, because they are not a partnership, they do not pass through losses to investors, but income. Dividends are taxed as ordinary income.
  3. Real Estate Limited Partnerships (RELPs): this form of limited partnership provides several advantages including capital appreciation, positive cash flow, numerous tax deductions (mortgage interest expense, depreciation and capital improvements) and tax credits (government assisted housing and historic rehabilitation properties). A brief description of the principal types follows.
    1. Raw Land - investment is for capital appreciation. No tax benefits inure to the investor. This is a quite risky investment.
    2. New Construction - investment is for capital appreciation with the tax benefits of depreciation and expense deductions. This too is rather speculative as the construction is new without an established track record..
    3. Existing Property - investment is for cash flow with the tax benefits of deductible mortgage interest and depreciation. Ongoing maintenance and the need to find lessees are considerations. Existing property is a somewhat lower risk investment.
    4. Government - Assisted Housing-investors receive tax credits and rent subsidies for investment in low-income and retirement housing. Appreciation potential is less as this is a lower risk investment.
    5. Historic Rehabilitation - investment is for the development of historical properties for commercial use in exchange for which investors receive tax credits and deductions for expenses and depreciation.
  4. Real Estate Mortgage Investment Conduits (REMICs)/Collateralized Mortgage Obligations (CMOs)



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