chapter 8 other areas of financial services Flashcards
what is fund management?
- where a firm creates an investment fund for its clients, which will enable those clients to invest together, sharing in any gains made or losses suffered
- the investment decisions will be made by the fund management firm
what is foreign exchange?
the result of international trade or international travel - the money held by one party needs to be exchanged into another currency before a transaction can be completed
what is insurance?
a method of managing risk
what does CIS stand for?
collective investment scheme
why is investing in a fund described as indirect investment?
the investor invests in the fund, and then the fund invests in the shares
explain how diversification is a key advantage of a fund
the fund is gathering together lots of individual investments and therefore is able to invest larger sums of money in a variety of different company shares
what are the benefits of using a fund rather than directly investing?
- money from a variety of investors is pooled into a single fund
- this will enable the fund to benefit from diversification benefits that might not be available to individual direct investors
- fund investors are effectively able to buy portions of individual shares
- the fund is run by a professional fund manager, who will be best placed to select the stronger investments
what is financial planning?
providing assistance to individuals, their families and businesses in organising their financial affairs to achieve their financial and lifestyle objectives
what is estate planning?
contemplating how best to deal with any assets, such as investments and property, on death, and making arrangements so that these assets are distributed in accordance with the deceased’s wishes
what are the benefits of funds?
- pooling of money to invest
- diversification, not putting all your investments into one firm
- fractions of shares can be bought by individual investors
- expertise of the professional fund manager
what are the major currencies involved in transactions in the foreign exchange market?
- the US dollar (around 88%)
- the euro (31%)
- the Japanese yen (17%)
- the UK pound (13%)
what are cryptocurrencies?
virtual or electronic currencies which use encryption technology, to control the amount of currency issued as well as to record ownership and payments
what is the first established cryptocurrency?
Bitcoin
how many cryptocurrencies are available today?
about 3,000
what are the risks of cryptocurrencies?
they are high risk and speculative, it is not uncommon for the value of cryptocurrencies to fluctuate by hundreds, or even thousands, of US dollars
