Forms of investments

Question 1

Forms of investment?

Answer 1

FUGS

Question 2

Positives of Government Retail Bonds?

Answer 2

● Guaranteed returns - interest rate is fixed for the whole investment period.
● Interest rates are market related - attract more investors.
● Interest can be received twice a year.

Question 3

Negatives of Government Retail Bonds?

Answer 3

●cannot be ceded to banks as security for loans.
● A minimum of R1 000 must be invested
● not freely transferable
● Investors need to have valid SA id

Question 4

Positives of Unit trusts?

Answer 4

● Managed by a fund manager
● Easy to cash in
● A small amount can be invested per month.
● beats inflation on the medium/long term.
● Safe investment - managed according to rules and regulations.

Question 5

Negatives of Unit trusts?

Answer 5

● Share price may fluctuate.
● Not allowed to borrow funds -reduces returns.
● Not for a short period investors
● Not for risk-free investors

Question 6

Positives of investing in shares?

Answer 6

● Can be freely transferred/traded on the JSE.
● Shareholders have voting rights AGM .
● provides protection against inflation.
● can provide solid returns at retirement age.

Question 7

Negatives of investing in shares?

Answer 7

● Shareholders may receive less dividends when profits are low.
● Companies have no legal obligation to pay dividends to shareholders.
● Risk may be high - company can liquidate

Question 8

Positives of Fixed deposits?

Answer 8

● Interest is earned at a fixed rate regardless of changes in the economy
● Investors can choose the investment period that suits them.
● Principal amount plus interest earned is paid out on the maturity date.

Question 9

Negatives of Fixed deposits?

Answer 9

● cannot withdraw funds before maturity date.
● Low returns compared to other investments.
● May not outperform the effect of inflation over long term.