Class notes
Investment
- Course
- Business Studies
- Institution
- 12th Grade
Business studies notes on investment
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INVESTMENT SECURITIES CHAPTER 12BUSINESS STUDIES
GRADE 12
TERM 3
CHAPTER 12
NOTES ON INVESTMENT: SECURITIES
2019
TABLE OF CONTENTS
TOPICS PAGES
Exam guidelines for investment : Securities 1
Terms and definitions 2-3
Functions of the JSE 3
Factors to consider when making investment 4-5
decisions
Types of investments and risk factors 5-9
Impact of FOUR forms of investments 9-11
Types of shares and their rights 12
Types of preference shares 12-13
Impact of preference shares 13-14
Rights of preference shares 13
Differences between ordinary and preference 14
shares
Description of investment concepts 14-15
Differences between compound and simple 15
interest
Calculations of simple and compound interest 15-16
and recommendation of the best investment.
1
,INVESTMENT SECURITIES CHAPTER 12
CONTENT DETAILS FOR TEACHING, LEARNING AND ASSESSMENT PURPOSES
Learners must be able to:
• Outline/Describe/Explain/Discuss the functions of the JSE.
• Explain a range of available business investment opportunities e.g.:
o Government/RSA retail savings bonds
o Unit trusts
o Shares
o Fixed deposit
o Managed portfolio
o Debentures
o Fixed property
o Mutual funds/stokvels
o Business ventures/venture capital
o Endowment/Life insurance policies/Retirement Annuities.
o 32-day notice accounts/Call Deposits
• Analyse the risk factor of each type of investment opportunity.
• Name/Describe/Explain/Discuss the types of shares.
• Explain the difference/Differentiate between ordinary and preferences shares.
• Outline/Describe/Explain the rights of preferences shareholders
• Explain/Describe the types of preference shares.
• Describe and evaluate (positives/negatives) of the following forms of investment:
o Government/RSA retail savings bonds
o Unit trusts
o Shares
o Fixed deposit
• Define/Explain the meaning of debentures, dividends, capital gain, simple interest,
compound interest.
• Outline/Explain/Discuss the factors that must be considered when making investment
decisions.
• Explain the differences between/Distinguish between compound interest and simple
interest.
• Calculate compound and simple interest from given scenarios.
• Recommend types/forms of investment based on the calculations.
Terms and definitions
Definition
Term
Investing/Saving money in order to yield better returns.
Investment
Is a formal market, trading in shares, comprising of all the public
JSE/Johannesburg
companies that have been listed.
Security Exchange
It gives investors the opportunity to obtain a part ownership of a
Share
company.
Capital Market / It is the market for securities/shares where companies and the
securities market government can raise long-term funds.
Short term investment An investment for a period shorter than one year.
Long term investment An investment for a period for longer than one year.
Fixed rate The rate of return stays the same for the period of time.
2
, INVESTMENT SECURITIES CHAPTER 12
Accumulated Interest earned over the investment period.
Simple interest Calculated on the original/principal amount invested.
Compound interest Calculated each period on the original/principal amount including
all interest accumulated during past periods.
Risk Refers to the chance that the invested amount may reduce in
value/lost in total over a period of time, due to unforeseen
circumstances.
Functions of the JSE
• Gives opportunities to financial institutions such as insurance companies to invest their
funds in shares.
• Serves as a barometer/indicator of economic conditions in South Africa.
• Keeps investors informed on share prices by publishing the share prices daily.
• Acts as a link between investors and public companies.
• Shares are valued and assessed by experts.
• Small investors are invited to take part in the economy of the country through the
buying/selling of shares.
• Venture capital market is made available on the open market.
• Orderly market for securities serves as a disciplined market for securities.
• Encourages new investments.
• Mobilises the funds of insurance companies and other institutions.
• Raises primary capital.
• Regulates the market for dealing with shares.
• Plans, researches and advises on investment possibilities.
• Ensures that the market operates in a transparent manner.
• Provides protection for investors.
• Encourages short-term investment.
• Facilitates electronic trading of shares/STRATE.
Factors that should be considered when making investment
decisions
• Return on investment (ROI)
• Risk
• Investment term/period
• Inflation rate
• Personal budget
• Liquidity
• Tax implications/Taxation
• Investment planning factors
• Fluctuations/Volatility of investment markets/Economic stability
• Track record/History/Performance of the business/sector to be invested in
• Additional costs/Administration fees/Brokerage applicable to the type of investment
3
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