Final answer:
Dominic has invested in a Real Estate Investment Trust (REIT), which is like a mutual fund that specializes in real estate assets, generating income through interest on loans and rents, while adhering to certain federal regulations to ensure stable, long-term returns.
Step-by-step explanation:
The type of investment Dominic has made appears to be in a Real Estate Investment Trust (REIT), which is similar to a mutual fund but specifically invests in real estate assets. REITs generate income primarily through the interest on loans to real estate owners and rents from real estate properties. They are required by federal law to distribute at least 90% of their taxable income to shareholders annually in the form of dividends, and they must invest at least 75% of their total assets in real estate.
Unlike traditional forms of real estate investment, REITs are designed to reduce or eliminate corporate income taxes. In this sense, they are a more accessible investment for individuals who want exposure to real estate without engaging in direct property management or development. REITs also have to follow strict regulations that prevent them from engaging in speculative, short-term real estate investments to sell for quick profits, which helps ensure a more stable and long-term-focused investment strategy.
Households looking to diversify their investment options have various avenues such as bank accounts, certificates of deposit, money market mutual funds, bonds, stocks, and mutual funds. Since households are considered as capital suppliers, they are critical for providing the resources that businesses and other entities need to grow and operate effectively through these investment channels.