Introduction to Stocks and Investments

Questions and Answers

What are stocks also referred to as?

shares or equities

Investing in stocks guarantees profit from your investments.

False

What is the primary purpose of purchasing bonds?

To gain ownership in a company

To invest in commodities

To lend money to an entity (correct)

To earn dividends

What are corporate bonds?

Bonds issued by companies Signup and view all the answers

How are mutual funds primarily used?

For group investments Signup and view all the answers

Certificates of Deposit (CD) are associated with high risks.

False Signup and view all the answers

What happens when the period of a Certificate of Deposit elapses?

The investor receives the principal and interest back. Signup and view all the answers

What is a fixed deposit?

A type of deposit locked for a fixed period of time Signup and view all the answers

Unit Investment Trust Funds (UITFs) can only be denominated in pesos.

False Signup and view all the answers

What is the investment objective of UITFs specified in?

Plan Rules (Declaration of Trust) Signup and view all the answers

Which of the following precious metals is most popular as an investment?

Gold Signup and view all the answers

Study Notes

Stocks

Stocks, also known as shares or equities, signify ownership in a publicly-traded company.
Investors profit by purchasing stocks when their value rises and selling them at a higher price.
Stocks carry risks; their value can decrease, resulting in financial loss.

Bonds

Bonds represent a loan from an investor to a business or government entity.
Corporate bonds are issued by companies, while municipal bonds are issued by local governments.
The U.S. Treasury issues Treasury bonds, bills, and notes.
Lenders receive interest payments during the bond's term, with the principal returned at maturity.
Bonds generally offer lower returns compared to stocks, but with reduced risk.

Mutual Funds

Mutual funds pool resources from multiple investors to invest in various businesses or companies.
Successful mutual funds require management, which can be either active or passive.
Investment types within mutual funds include securities such as bonds, equities, derivatives, commodities, and currencies.

Certificates of Deposit (CDs)

CDs are low-risk investments where money is deposited in a bank for a fixed period.
Upon maturity, the investor receives the principal plus predetermined interest.
Longer deposit periods yield higher interest rates.
CDs are PDIC-insured up to P500,000, minimizing risks related to bank failure.

Fixed Deposits

Fixed deposits lock a sum of money for a specified tenure, which can range from days to years.
They are popular due to their safety and guaranteed returns with minimal risk of capital loss.
Fixed deposits generally offer better interest rates than savings accounts.
Tax-saving fixed deposits are available, providing potential tax benefits.

Unit Investment Trust Funds (UITFs)

UITFs are open-ended pooled trust funds, typically operated in pesos or other currencies.
Each UITF has a Declaration of Trust detailing its investment objectives and management process.
UITFs can cater to various investment time frames—most are medium to long-term.
Investors should have available funds to maximize the earnings potential of UITFs.

Gold as an Investment

Gold is the most popular precious metal investment, often used for risk diversification.
Investors engage in the gold market through futures contracts and derivatives.
The gold market exhibits speculation and volatility similar to other asset markets.

Description

This quiz covers the basics of stocks, including their definition as shares or equities and the concept of ownership in publicly-traded companies. Learn about the potential for profit and the associated risks of investing in stocks. Explore how stock value fluctuations can impact investment decisions.