INVESTMENT Flashcards
What is the criteria for risk
- risk, ROI, time frame
the growth investment strategy
- high risk
-long term capital growth, rather than a monthly income - shares in the JSE may be considered, with blue chip shares reducing the risk factor somewhat
Balanced investment strategy
- investor is prepared to accept medium risk
- aim is capital growth w some monthly income
- a combination of equities and some interest bearing investment like a fixed deposit will be considered or investment in property w a monthly rent income
Defensive investment strategy
- low risk
- emphasis is more on monthly income but investor wants some capital growth as well
- investments in property and money in the bank with much smaller investments in equities
Conservative investment strategy
- limited risk
- focus on monthly income while maintaining capital amount of the investment
- majority of the investment will be in property and cash instruments to generate monthly income should lead to capital growth
Eg of investment options
- Equities
- Debentures
- Retirement annuities
- Endowments
- Offshore investment
- Unit trusts
- Collectibles
- Notice deposit
- Fixed property
Explain equities/ shares
- share is a part of a company which means shareholders are part owners in a company
- stock markets like JSE provide a market for dealing in listed shares
- Prices for these shaded is based on supply and demand
Equities - ROI, RISK TIME
- risk: JSE has strict rules for companies to list on JSE - protects investors > despite this there is still moderate to high risk. - blue chip shares = less risk + higher ROI
- ROI: based on 2 factors increase in share price and dividends - market forces - supply and demand
- time frame: some prefer to invest in shares with no short term need to see large capital gains. Some buy in companies that will have significant increase and then sell to make a profit
Explain debenture
IOU - sometimes called bonds - usually not secured by specific assets.
3 types - redeemable, irredeemable, convertible
Debentures RISK ROI TIME
Risk: - when debenture is sold it’s fixed interest rate
- debentures are usually unsecured which means risk is linked to financial position
- it carries higher risk than investments at banks - lower risk than a investment in shares.
ROI: - no capital growth just steady stream of interest
TIME: - long term
Explain retirement annuities and pension funds
- policy that aims to provide and income to the person when they reach a certain age
pension and annuities RISK ROI TIME
RISK: people wait too long to start a pension fund - inflation and increase in expense as you get older in things like health care
ROI: determined by fund management and there’s not definite guarantee
TIME: depending on no. of years you contribute will affect the value you will receive
Explain endowment
Form of long term saving - you will get full amount when the predetermined period is up
Endowments RISK ROI TIME
RISK: you’re able to choose the risk profile you would like. If the investor has chosen monthly contributions they can take a contribution waver which will cover the investor in case of injury or disease if they are now unable to contribute - this is risk management
ROI: dependant on risk profile chosen + there are management and admin fees that will be deducted this will reduce ROI
TIME: 5-10 years - long term savings plan
Explain offshore investments
- investing money into a foreign country for higher return and greater diversification
