Questions and Answers
What is investment?
An action or process of investing money to gain profit or to obtain an additional source of income.
What does appreciation refer to in the context of investment?
An increase in the value of an asset over time.
Which of the following is a primary objective of investment?
What is portfolio management?
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Which of the following can be tax-deductible under the Income Tax Act, 1961?
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Why is it essential to save up for retirement?
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Investments that pay regular interest are called ______.
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What does capital appreciation help people achieve?
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What are some of the best investments for growth?
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Investments can only generate income during retirement.
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What is one of the compelling objectives for investment related to taxes?
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Study Notes
Investment Concepts
- Investments are assets acquired to generate income or appreciation over time.
- Appreciation is defined as an increase in the value of an asset.
- The primary intent behind purchasing an investment is to build future wealth rather than immediate consumption.
Definition of Investment
- Investment involves allocating money with the expectation of profit or an additional income source.
- Investments create assets intended for financial growth, aiding in income shortages, retirement savings, loan repayments, or tuition fees.
Portfolio Management
- Defined as the strategy of selecting an investment policy that balances risk and return effectively.
- Involves managing various assets like bonds, shares, cash, and mutual funds for maximum profitability within a designated timeframe.
- Can be conducted under the guidance of portfolio managers for effective money management.
Objectives of Investment
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To Keep Money Safe:
- Capital preservation ensures hard-earned money retains its value over time.
- Safe investments include fixed deposits, government bonds, and savings accounts, often yielding lower returns.
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To Help Money Grow:
- Long-term capital appreciation aims to build a substantial financial corpus.
- Higher-return investments entail real estate, mutual funds, commodities, and equities, albeit with higher risk.
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To Earn a Steady Stream of Income:
- Investments can provide consistent secondary or primary income, like fixed deposits with regular interest payments or dividend-paying stocks.
- These sources aid in meeting daily expenses during retirement or supplementing income during the working years.
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To Minimize the Burden of Tax:
- Tax benefits from certain investments can reduce taxable income, contributing to lower tax liabilities.
- Qualifying options include Unit Linked Insurance Plans (ULIPs), Public Provident Fund (PPF), and Equity Linked Savings Schemes (ELSS).
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To Save up for Retirement:
- Establishing a retirement fund is crucial for financial security in later years when employment may not be sustainable.
- Investing wisely during working years helps ensure adequate funds are available post-retirement.
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To Meet Financial Goals:
- Investments can ease the pursuit of both short-term and long-term financial objectives without excessive stress.
- Certain financial instruments offer short lock-in periods and high liquidity, making them suitable for short-term savings.
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Description
Test your knowledge on Investment and Portfolio Management within the context of the Philippines. This quiz covers key concepts such as investment instruments, local financial markets, and the regulatory environment that influences investment decisions. Prepare to enhance your understanding of how economic factors affect investment practices.
