Midterm Topics - Part 2 Flashcards
Three types of Risk Appetite
(1) Conservative
(2) Moderate
(3) Aggressive
Prioritize security over returns such as banks, mp2 savings, cooperative bonds.
Conservative
Earning through capital gains from selling asset, cash flow (dividends, interest, etc.)
Examples are index funds, mutual funds, dividend stocks
Moderate
Have high risk tolerance. Willing to risk more money.
Aggressive
Six Investment Alternatives
(1) Shares
(2) Debentures/Bonds
(3) Bank deposits
(4) Insurance
(5) Real Estate
(6) Gold/Silver
Granting ownership from the company which you bought shares.
Shares
Two types of shares
(1) Common or Ordinary Shares
(2) Preferred Shares
Considered volatile because of the changes in market price
Shares
Have no voting rights. Have priority over a company’s income.
Preferred shareholders
Last in line when it comes to company’s assets. Have voting rights.
Common shareholders
All _____ are bonds but not all bonds are _____.
Debentures
May be unsecured or secured. With interest and maturity.
Debentures/Bonds
Considered safe Investment, may earn interest in savings.
Banks deposits
Advantages of Bank Deposits
(1) Adequate Liquidity
(2) Banks offer loan facilities
(3) Procedures and Formalities
(4) Banks offer various services
Limitations on Bank deposits
(1) Rate of return is low
(2) ROI is not adequate
(3) Capital appreciation is not possible
Examples of insurance
(1) Life Insurance
(2) Health Insurance
(3) Funeral Insurance
(4) Non life insurance
Earns rent income, appreciation
Real Estate
When the value of other investment fall, _____ appreciates in value.
Gold/Silver
When you buy _____ you may invest in top 30 companies in the Philippines.
Index stocks
When income exceeds consumption desires, people tend to _____ the excess.
Save
Consuming less out of a given amount of resources in the present in order to consume more in the future.
Deferred consumption
Referred to as the price of borrowing
Interest rates
Basic Investment Objectives
(1) Primary Investment Objectives
(2) Secondary Investment Objectives
Three Primary Investment Objectives
(1) Security
(2) Liquidity
(3) Yield
Two secondary investment objectives
(1) Tax minimization
(2) Marketability
Two concepts of investment
(1) Economic Investment
(2) Financial Investment
