Investment Options Overview

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Questions and Answers

Which factors primarily determine the risk of fixed property investment?

  • The condition and location of the property (correct)
  • Market demand and seasonal trends
  • The age of the property and community reputation
  • The investor's financial history and interest rates

What is a notable disadvantage of investing in collectibles?

  • They require a substantial initial investment
  • They do not provide regular income to the investor (correct)
  • They are highly volatile in nature
  • Their value is solely determined by market trends

How can damage to a collectible impact its financial value?

  • It increases its rarity, thereby increasing value
  • It has no impact on its value
  • It only affects its sentimental value
  • It significantly reduces its value (correct)

What is a common characteristic of fixed deposits in terms of capital access?

<p>Funds can only be accessed upon maturity or under specific conditions (D)</p> Signup and view all the answers

What happens to the interest rate on a fixed deposit if the prime rate changes?

<p>It might change depending on the terms agreed with the bank (C)</p> Signup and view all the answers

What is the typical time frame for money market accounts?

<p>Short-term, ranging up to one year (B)</p> Signup and view all the answers

What is a common feature of returns on money market accounts?

<p>They often have lower interest rates compared to other options (A)</p> Signup and view all the answers

Regarding the liquidity of investments, how do money market accounts compare to collectibles?

<p>Money market accounts are more liquid than collectibles (D)</p> Signup and view all the answers

What is a potential consequence of investing in fixed deposits during periods of high inflation?

<p>Returns may be challenging to achieve that exceed inflation (A)</p> Signup and view all the answers

What can influence the appreciation of a collectible over time?

<p>Increased artistic recognition or 'discovery' of a piece (B)</p> Signup and view all the answers

Flashcards

Collectibles

Items like antiques, coins, or art that people collect and may appreciate in value over time.

Collectible Risk

Damage or market fluctuations can lower the collectible's value.

Collectible ROI

Potential for appreciation but no guaranteed income.

Fixed Deposit

Investment where you deposit money for a set time at a fixed or variable interest rate.

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Fixed Deposit Risk

Low risk, but banks failing may be a concern.

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Fixed Deposit ROI

Interest earned, but often lower than inflation.

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Money Market Account

Short-term investment with moderate liquidity and lower interest compared to some options.

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Money Market Account Risk

Lower interest rate than other options but relatively low risk.

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Fixed Property

Investment in residential or commercial properties.

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Fixed Property Risk

Risk depends on factors like property location, type, and condition.

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Study Notes

Investment Options

  • Money Market Accounts:
    • Short-term investment accounts
    • Easy access to funds
    • Liquid
    • Lower interest rate than other savings options
    • High liquidity
    • Example: Call accounts
    • Can be held indefinitely
    • 32-day period (for example)

Fixed Deposits

  • Description:

    • Invests fixed amount for fixed time
    • Interest rate can be fixed or variable
    • Long-term investment
    • Funds received only at maturity or death of investor
    • Penalty for early withdrawal

  • Risk:

    • Bank liquidation (rare) is a slight risk
    • Low overall risk

  • Return:

    • Interest rates vary between banks
    • Higher interest rates for longer terms and larger amounts
    • May not offset inflation (cumulative interest)
    • Possible capital growth via reinvestment of interest

Collectibles

  • Description:

    • Antiques, coins, artwork, stamps
    • Market understanding crucial for investment
    • Limited South African market versus international
    • Technology improving accessibility to market

  • Risk:

    • Damage diminishes value
    • Requires expert knowledge

  • Return:

    • Value increase potential with no damage
    • No monthly income
    • Volatility is low
    • Potential for profit from low-cost buys of valuable items

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