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Business studies > Investment > Flashcards

Investment Flashcards

1
Q

What is an investment?

A

An asset or item that is purchased with the hope that it will generate income or appreciate in the future.

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2
Q

what are the different types of investments

A

Equities

Debentures

Retirements annuities/
pension funds

Endowments

Off-shore investments

Unit trusts

Collectibles

Notice deposits

Money market funds

Fixed Property

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3
Q

name the investment strategies

A

growth strategy
balanced strategy
defensive strategy
conservative strategy

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4
Q

growth strategy

A

High risk

Long-term capital growth (Rather than a monthly income)

Shares (Blue chip shares will reduce the risk)

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5
Q

balanced strategy

A

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.

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6
Q

defensive strategy

A

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

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7
Q

conservative strategy

A

No risk

Focus is on a monthly income as well as capital growth

Invest in property and cash to generate an income

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8
Q

conservative strategy

A

No risk

Focus is on a monthly income as well as capital growth

Invest in property and cash to generate an income

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9
Q

Equities /shares (risk )

A

=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

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10
Q

Equities /shares (ROI )

A
  • increase in share price
    -dividends
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11
Q

Equities /shares (time )

A

longe term
receive dividends -long term

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12
Q

debentures (risk)

A

-Debentures are often sold at a fixed
interest rate.

-Higher risk than bank investments but
lower risk than shares.

-Debentures are unsecured.

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13
Q

debentures (ROI)

A

1.Companies have to pay interest.

2.No capital growth

3.Higher interest rate (unsecured)

  1. Interest is taxable.
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14
Q

debentures(time)

A

may be used as a long term
financial instrument

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15
Q

Retirement Annuities/ Pension funds (risk)

A

how and where the administrator has
invested.

manage the risk of individuals.

can’t maintain their standard of living.

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16
Q

Retirement Annuities/ Pension funds (ROI)

A

-determined by the fund manager

-No definite guarantees.

-Funds make predictions

-Administration and management fees

17
Q

Retirement Annuities/ Pension funds (time)

A

Depending on the number of
years you contribute will
directly affect the value you
receive

18
Q

Retirement Annuities/ Pension funds .Reasons why people may not be financially secure at retirement:

A

People wait too long to invest.

People live longer

Higher medical costs.

Provision for other benefits lost.

19
Q

endowments (risk)

A

-The investor gets to choose the risk
they would like.

-Contribution Waiver.

20
Q

endowments (ROi)

A

Depends on the risk
profile chosen

Management and
administration fees

21
Q

endowments (time)

A

5 to 10 years

22
Q

offshore investments (reasons for choosing it)

A

Diversification.

Changes in exchange rate.

Opportunities in other countries.

Emigrating.

23
Q

offshore investments (time)

A

Limitation on the amount of
money that can be taken
out the country every year.

Short or long term
investment

24
Q

unit trust (risk)

A

The option available to choose from
includes high risk Equity fund to a
Stable fund.

25
Q

unit trust (ROI)

A

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.

26
Q

unit trusts (time)

A

medium to long term investments

27
Q

collectibles (risk)

A

Requires a high level of
knowledge and
expertise.

Damage to a collectible
decreases the value.

28
Q

collectibles (ROI)

A

Value will increase over
time.

No monthly income.

29
Q

collectibles (time)

A

Growth over the long term. profit over a short period of time if you
were able to buy the collectable at a low price

30
Q

fixed deposits(risk)

A

Money invested in the
bank, generally has
low risk

31
Q

fixed deposits(ROI)

A

Longer the time invested and the higher the amount
invested will determine the interest rate.

Doesn’t beat inflation

32
Q

fixed deposits(time)

A

1 to 10 years

33
Q

Money market
accounts(risk)

A

low risk

34
Q

Money market
accounts(ROI)

A

Lower interest rates than
other long term investments

35
Q

Money market
accounts(time)

A

short term investment option

36
Q

fixed property (risk)

A

Location, location, location

State of the economy

Capital Gains Tax

37
Q

fixed property (ROI)

A

Rental income

Increase in property over time.

38
Q

fixed property (time)

A

best results over the long term

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