detailed notes on investment for IEB matric syllabus. everything is according to the SAGS and most are from past IEB exam memos. there are extra details from the textbook "Grade 12 NSC Business Studies" by studying business. it summarises and is easy to understand with hard explanations made easy.
Three criteria used to evaluate investment options:
Risk:
- A high-risk investment is expected to deliver a high return on the investment if it is
successful.
- However, if not successful then it can result is a great loss.
- The higher the risk the higher the return however the higher the loss if unsuccessful
- Diversification:
o This is when you invest in various investment options of varying risk levels.
o It is basically not putting all your eggs in one basket.
o So, if you lose on one investment you still have other investments, so you
didn’t lose everything.
o Basically, investing in various asset classes
- Investors have the option to invest in the degree of risk dependant on them.
Return on investment (ROI):
- A tool used to measure the efficiency of the investment.
- It is what the investors will get back over and above what they invested.
Time frames (period of investment):
- The longer the period of investment available to the investor, the greater the risk the
investor can afford to take.
- This is because the investor has more time to make up losses if they occur.
- If someone has a shorter time frame, they are older, they don’t have as much time to
make up the loss and there fore must invest in less risky investments.
investment description Risk Return Time frame
Equities/shares - Equities are - Moderate to Two factors: Two types:
shares in a high-risk - 1: increase in Investors:
company investment share price - These
- Some - The JSE and - 2: dividends people
companies other stock invest with
are listed on exchanges try *Dividends: no short-
the JSE, to protect - profit of a company term need
meaning they investors by that is divided to see huge
are public and limiting risk of among shareholders. capital gain
anyone from investment. -Not taxed at hands - Invest in
the public can This is still a of shareholders in more blue-
buy shares risky SA. chip
- Some investment. -if a company companies.
1
,Michaela Grasko
companies - Blue- chip performs poorly - More
are unlisted shares: sometimes no sustainable
meaning they - High-end dividend will be - Get long
are private, companies issued or only term capital
and they - Lesser risk and majority growth
shareholders yield higher shareholders will (from share
can only sell ROI than other receive dividends. price).
their shares to listed Shareholders will - Focused on
people. companies. buy shares in a dividend and
- The Stock - Investors take company with the use
market smaller risks expectation that: dividends to
reflects the than - The share price buy more
financial speculators will increase over shares.
performance (investment vs a period. - Summary:
of listed speculators in - Good dividends - Long term
business. time frame) will be - Sustainabilit
However generated. y
financial A combination of the - Dividends
performance above occurs, as it focused
of unlisted helps to outperform - Blue-chip
companies if inflation.
only available Speculators:
to - The price of a - Speculators
shareholders, share on the are people
bankers, stock market is who buy
creditors, and determined by shares in
SARS. (Not the supply and companies
general demand. that they
public). - There are feel will have
- Owners of various factors a quick and
shares each that affects the significant
own a portion supply and increase in
of the demand of share price.
business. shares, and - Will sell
- There are two these factors shares when
types of thus also shares have
shareholders influence the ROI opportunity
- 1: shares were of an equity to profit.
bought when investment - Not
they were first Factors: concerned
issued, thus 1: economic state of with
the persons country dividends.
shares - The better the - More short
contribute to economy the term, get
the more confidence monetary
company’s investors have to gain from
capital. invest in that share price
2
, Michaela Grasko
- 2: shares were country as the profit.
bought of the security and risk
JSE form a is decreased.
previous - Bull market:
shareholder. anticipate share
The money price increasing
goes to the and it increases
shareholder - Bear market:
sold their anticipate share
shares and price decreasing
not to the and it decreases.
business’s 2: government
capital. policies or new
legislation:
- Laws and
legislation
influence a
countries
economy and
this investors
confidence
therefore
affecting share
price.
3: industry
performance:
- Affects listed
companies in
industrial sector
- Bad or good
publicity strongly
influences
investors appeal
and confidence
in that company.
- The overall
reputation and
other factors
make some
industrial
companies more
appealing to
investors.
4: financial
performance:
- Sales, profits,
financial ratios
3
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