this document contains summaries and notes made from " Consumo
Business studies textbook" which summarizes different types of investments such as equites, debentures, endowments, unit trusts etc..
Criteria used to evaluate each investment option:
Risk.
Return on investment.
Time frames.
Risk:
- A high-risk investment is expected to deliver a higher return on investment if the
investment succeeds.
- High risk investments could result in big loss if investment fails.
Return on investment {ROI}:
- A tool to measure the efficiency of the investment.
- Indicator of what the investor will get back over and above the original investment.
Timelines (period of investment):
- The longer the period of investment available to the investor, the greater the risks are that
the investor can afford to take.
Investment strategies:
Growth investment strategy
High risk
Long – term capital growth. (Rather than monthly income)
Shares on JSE may be considered, Blue – chip shares reducing the risk factor.
Balanced investment strategy
Medium risk
Aim is capital growth. (With monthly income as well)
Combination of equities will be considered such as investment in property with a
monthly income rent.
, Defensive investment strategy
Low risk.
More emphasis on monthly income. (Investor wants capital growth as well)
Investments in property and money in bank. (Smaller investment equities)
Conservative investment strategy
Conservative investor does not want risk.
Focus on monthly income. (Maintaining the capital amount of the investment)
Majority of investment will be in property and cash instruments to generate monthly income.
Also known as shares, some companies are listed on the JSE some are unlisted.
When considering equities, we look at listed companies because information on shares is
available unlike unlisted companies whereas information on shares performance is unavailable to
the general public.
Owners of shares own a portion of the business.
Two options/methods to become shareholder in a company listed on the JSE:
1. The shares were bought from the company when shares were issued the first time, thus the person
who bought the shares contributes capital to the business.
2. The shares were bought on the JSE from a previous shareholder. The money paid for the shares is
not going to the business but to the person who sold his/her shares. Shares bought & sold on the
JSE have no impact on the capital available to the business.
Risk
Moderate high – risk investment.
Blue-chip shares are shares in high- end companies on the stock exchange and the risk
of acquiring shares in a blue-chip company is smaller than having shares in another
company.
Investors usually take smaller risks than people speculating with shares.
Return on investment {ROI}:
Increase in share price.
Dividends.
Time:
Long term investment.
Receives dividends- long term.
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