Investment Flashcards
What is an investment?
An asset or item that is purchased with the hope that it will generate income or appreciate in the future.
what are the different types of investments
Equities
Debentures
Retirements annuities/
pension funds
Endowments
Off-shore investments
Unit trusts
Collectibles
Notice deposits
Money market funds
Fixed Property
name the investment strategies
growth strategy
balanced strategy
defensive strategy
conservative strategy
growth strategy
High risk
Long-term capital growth (Rather than a monthly income)
Shares (Blue chip shares will reduce the risk)
balanced strategy
Medium risk
The aim is capital growth with some monthly income too
A combination of equities plus interest bearing investments like
fixed deposits or investment in property with a monthly rental
income.
defensive strategy
Low risk
An emphasis on a monthly income with some capital growth
Invest in property, money in the bank and a smaller investment
in equities
conservative strategy
No risk
Focus is on a monthly income as well as capital growth
Invest in property and cash to generate an income
conservative strategy
No risk
Focus is on a monthly income as well as capital growth
Invest in property and cash to generate an income
Equities /shares (risk )
=Generally moderate to high risk
=JSE have strict rules for companies listed.
=Blue-chip shares will decrease the risk
=Industrial action
=Political instability
=Strength of the Rand
=Poor management of companies
Equities /shares (ROI )
- increase in share price
-dividends
Equities /shares (time )
longe term
receive dividends -long term
debentures (risk)
-Debentures are often sold at a fixed
interest rate.
-Higher risk than bank investments but
lower risk than shares.
-Debentures are unsecured.
debentures (ROI)
1.Companies have to pay interest.
2.No capital growth
3.Higher interest rate (unsecured)
- Interest is taxable.
debentures(time)
may be used as a long term
financial instrument
Retirement Annuities/ Pension funds (risk)
how and where the administrator has
invested.
manage the risk of individuals.
can’t maintain their standard of living.
Retirement Annuities/ Pension funds (ROI)
-determined by the fund manager
-No definite guarantees.
-Funds make predictions
-Administration and management fees
Retirement Annuities/ Pension funds (time)
Depending on the number of
years you contribute will
directly affect the value you
receive
Retirement Annuities/ Pension funds .Reasons why people may not be financially secure at retirement:
People wait too long to invest.
People live longer
Higher medical costs.
Provision for other benefits lost.
endowments (risk)
-The investor gets to choose the risk
they would like.
-Contribution Waiver.
endowments (ROi)
Depends on the risk
profile chosen
Management and
administration fees
endowments (time)
5 to 10 years
offshore investments (reasons for choosing it)
Diversification.
Changes in exchange rate.
Opportunities in other countries.
Emigrating.
offshore investments (time)
Limitation on the amount of
money that can be taken
out the country every year.
Short or long term
investment
unit trust (risk)
The option available to choose from
includes high risk Equity fund to a
Stable fund.
unit trust (ROI)
Good unit trusts will out
perform inflation over the
medium term 3-5 years.
The rate of return will
depend on the risk option
chosen.
unit trusts (time)
medium to long term investments
collectibles (risk)
Requires a high level of
knowledge and
expertise.
Damage to a collectible
decreases the value.
collectibles (ROI)
Value will increase over
time.
No monthly income.
collectibles (time)
Growth over the long term. profit over a short period of time if you
were able to buy the collectable at a low price
fixed deposits(risk)
Money invested in the
bank, generally has
low risk
fixed deposits(ROI)
Longer the time invested and the higher the amount
invested will determine the interest rate.
Doesn’t beat inflation
fixed deposits(time)
1 to 10 years
Money market
accounts(risk)
low risk
Money market
accounts(ROI)
Lower interest rates than
other long term investments
Money market
accounts(time)
short term investment option
fixed property (risk)
Location, location, location
State of the economy
Capital Gains Tax
fixed property (ROI)
Rental income
Increase in property over time.
fixed property (time)
best results over the long term
