Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Business > Investment *G12 > Flashcards

Investment *G12 Flashcards

1
Q

Criteria to evaluate investment options *3

A

*risk
*ROI
*timelines

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Risk

A

High risk is expected to deliver a higher ROI if it succeeds, vice versa if it flops tho (loss)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Return on Investment *2

A

*Measuring tool to evaluate the success of an investment
*What will we get back and above what we originally invested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Timelines *2

A

*Period of investment
*longer the period, more risks investor can afford to take (time to recover loss)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Risk Profiling: completing a risk profile… *2

A

*To determine the best suited investment types
*Creates understanding of investors risk tolerance and therefore if expected ROI is acceptable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Issues an investor has to consider (risk profile) *3x2

A

*time horizon- longer the investment, the more you can afford a mix of high and low risk investments
*current financial position- when a decision taken on size of investment is relative to the investors portfolio
*investment objectives and risk tolerance- high return, more risk and vice versa

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

To elaborate on current financial position of investor (risk Profiling)
It is important to…

A

*look towards future investment risk - more income, balanced/conservative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Investors portfilio

A

Total net asset worth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Diversification *2

A

*spreading investment risk between various asset classes
*most should include combo of the 4 major asset classes for benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Diversification: investors prepared to hold a combo of the 4 major asset classes stand a greater chance (a) over the (b) than those who only invest in (c) such as (d)

A

(a) higher returns
(b) long term
(c) conservative investment
(d) cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Diversification: by combining (a) with (b) and (c), investors are employing a sound strategy to control the balance of (d) and (e) in their portfolio

A

(a) growth potential of equities
(b) higher income of bonds
(c) stability of money market funds
(d) risk
(e) reward

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Investment strategies *4

A

*growth
*balanced
*defensive
*conservative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Growth investment strategy *3

A

*high risk
*long term capital growth
*equity (shares) on JSE > blue chip
McDonald’s

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Balances investment strategy *3

A

*medium risk
*mostly capital growth, some monthly income
*equities + property
Rocmamas share and a restaurant building

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Defensive investment strategy *3

A

*low risk
*mostly monthly income, some capital growth
*property + money in the bank, smaller equities
Bakeries and share in modest bakery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Conservative investment strategy *3

A

*really low risk
*monthly income maintaining capital amount
*property and cash instruments > capital growth at some point
Just restaurant buildings and cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

4 major asset classes

A

Cash
Property
Bonds
Equities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Cash (4 major asset classes) *4

A

*safe investment - not make a fortune nor lose one
*offer regular interest income
*capital not subject to huge external fluctuations
*low risk- no guarantee of protection against inflation as it does not have capital growth investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Property (4 major asset classes) *4

A

*often biggest asset in portfolio (own or buy-to-let)
*keeps up inflation and effective way of gearing investment
*lack of liquidity- cannot sell as quickly as other assets
*risk- moderate to high - location + political and economic environment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Positive leverage effect

A

Using external financing can increase ROI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Gearing

A

Ratio of borrowed money to own capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Bond (4 major asset classes) *3

A

*interest bearing securities in order to to borrow money
*bond issuer pays regular interest to repay the original investment amount on a set date
*moderate risk- capital invested can fluctuate but interest payment is higher than cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Bonds are issued by

A

Government or companies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Equities (4 major asset classes) *4
*investor owns part ownership in the company- shareholders *some companies are listed on a stock exchange (shares traded freely) *best chance of beating inflation over the long term (if invested in blue chips) *high risk- as share value increases, profitttttt
26
Investment options (excluding the 4 major asset classes) *5
*retirement annuities and pension funds *endowment *offshore investments *unit trusts *collectibles
27
Endowment description *4
*life insurance contact to pay a lump sum after a specific term/death *form of long term savings (lump/monthly contributions) *investor will get full amount when policy matures *5-20 years, in case of death, next sun receives
28
Endowment risk *3
*medium *investor can choose best suited profile *life assurance can be added
29
Endowment ROI *2
*depends on selected risk profile chosen *management and admin fees will reduce ROI
30
Endowment time frame
Long term Like we said 5-20 years
31
Retirement annuities description *2
*type of savings plan to provide money for retirement *monthly premium in return for a lump sum and monthly pension after you retire by 55
32
Pension fund description *2
*also form of retirement savings *employer joins pension fund to organise the investment of employees retirement funds (employer and employees)
33
RA and pension funds risk *2
*depends on how and where administrators have invested contributions *pension funds have the option to help members manage risk in terms of death/disability bc it covers them
34
RA and pension fund ROI *2
*determined by investment manager's decisions and inflation *administrative and management costs reduce ROI
35
RA and pension fund time frame
Long term Like 20 to 40 years
36
Offshore investment description *2
*Keeping of money in a jurisdiction outside of country of residence *Good to have foreign component in portfolio (reduces risk level)
37
Offshore investment risk
I wanna say medium to high bc of volatile markets and fluctuations
38
Offshore risk ROI *4
*benefits of diversification *positive currency fluctuations *exploiting investment opportunity not existing in own country *appreciating currency
39
Offshore investments time frame *2
*government sets limit of money taken out the country every year to stabilise the economy *offshore investments may vary short term to long term
40
Why do countries set limits on the amount of money taken out of a country
Own economy won't grow if only invested in others
41
Wh would someone have and offshore investment- not referring to ROI
tax avoidance
42
How can one do tax avoidance
Trading with cash gives cash benefits
43
Unit trust description *3
*group of investors who pool their capital to invest in financial markets *instead of buying shares or bonds individually, you can buy units *can be bought with lump sum, monthly contributions or both
44
Unit trusts aka
Basket of shares
45
3 parties to a unit trust investment *3×2
*Management company- manages investment on behalf of investors *Trustee company- safekeeping portfolio of assets *Unit holder- investor and group
46
Management company aka
MANCO
47
Trustee company aka
Bank or insurance company
48
Unit trust risk
vary from high risk fund (all funds invested in shares) to stable risk fund where risked are reduced by diversification
49
Unit trust ROI and what it depends on *1+1
*medium - outperform inflation in 3 to 5 years *depends on risk option but also on how well fund manger invested money
50
Unit trust time frame
Medium to long term
51
Why would someone want to invest in unit trust
Bigger summer, bigger ROI
52
Collectables *2
Items you collect ig *antiques, coins, artwork, stamps, kruger rands *important to know the market
53
Why is it important to know the market of collectables
To understand worth and proper value
54
Collectables risk *4
*high level of knowledge and expertise *no monthly income *damage will drastically diminish value *have volatile capital values and SA market is limited
55
Collectables ROI *2
*if truly collectable, article value will increase over time *no monthly income
56
Collectables time frame *3
*volatile market *growth expected over time *lucky to get profit short time
57
Equities ROI *2
Shares will be bought with the expectation that *share price will increase *good dividends will be generated
58
Equities time frame *2
*long term- desire as much ROI as possible and are willing to wait *speculators- buy shares with quick increase in price then sell at profit
59
Factors that influence share price *5
*levels of confidence in state of economy- if doing well, investors more likely to buy *government policies and legislation- imact on economic state confidence *industry performance- investors gain interest *confidence in management- more confidence, more shares *public relations- different matters affect reputation and ultimately the share price
60
Types of debentures *3×2
*redeemable- payable on predetermined date *irredeemable debenture- never paid back + no timeframe, WILL LAST INDEFINITELY w/ holder GETTING INTEREST *convertible- converted into shares at a pretermined date
61
Debentures risk *3×2 (my financial investment)
*depends on company financial success - bankruptcy = loss *Increase in fixed interest rate - lower earning for debenture holder *higher risk than bank investments but lower risk than shares
62
Why do debentures carry higher risk than bank investments but lower risk than investment in shares
Creditors rank higher than owners to regain money in the event of liquidation
63
Debentures ROI *4 (open no higher seldom)
*company that issues it is legally obliged to pay interest *no capital growth, just steady stream of income *higher interest rate to compensate for higher risk *after interest income is taxed, ROI on debentures seldom beats inflation
64
Debentures time frame and backed only by what *1+1
*long term financial instrument- earn interest until the time debenture is redeemed *backed only by credit worthiness and reputation of issuer
65
Bonds aka *2
*gilts *debentures
66
Fixed property ROI *2
*can charge rent if its second property *it's an appreciating asset
67
Fixed property time frame
long term - prices take a while to increase
68
Notice deposits options *2
Fixed deposits Money market accounts
69
What is a notice deposit
investments where money earns interest but to access funds, you need to give a notice
70
Fixed deposit description *3
Fixed amount invested* for fixed (predetermined) time* at interest that can be fixed or changes as prime rate*
71
Fixed deposit risk
*low- only lost if bank is liquidated
72
Fixed deposit ROI *4
*depends on amount invested *low risk therefore low ROI *longer time frame and higher investment amount = higher return *capital growth if reinvested to earn cumulative invested
73
Fixed deposit time frame *2
*long term only withdrawn when maturity date is reached or death *1-10 years
74
Money market account description *3 (curry eats him)
*interest based on current interest rates in money markets *easy to gain access in short term because they are very liquid *higher interest than savings account
75
Money market account risk *2
*very low risk *less likely to be affected by market behaviour
76
Money market ROI *2 (just comparisons tbh)
*lower interest rate than long term investment *interest on money market accounts outperform normal savings account
77
Money market account time frame
*short term- month to a year

Business (29 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions