Podcast
Questions and Answers
What is a share or stock?
What is a share or stock?
A share represents a unit of ownership of the issuing company.
What are the two broad types of shares?
What are the two broad types of shares?
Equity shareholders are entitled to a fixed dividend.
Equity shareholders are entitled to a fixed dividend.
False
_______ shares are issued to existing investors to protect ownership rights.
_______ shares are issued to existing investors to protect ownership rights.
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What are authorised share capital?
What are authorised share capital?
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Match the types of preference shares with their characteristics:
Match the types of preference shares with their characteristics:
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Participating preference shareholders have the right to additional dividends after equity shareholders.
Participating preference shareholders have the right to additional dividends after equity shareholders.
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What is the process of dividing your investment portfolio among different asset classes called?
What is the process of dividing your investment portfolio among different asset classes called?
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Study Notes
Savings vs. Investing
- Saving is putting money aside for future use, typically in a deposit account or similar
- Investing involves putting money into assets with the potential to grow in value over time, such as stocks, bonds, or real estate
Types of Investments
Equity Investments
- Represent ownership in a company
- Equity shareholders have voting rights and share in company profits
- Higher risk than debt investments
Debt Investments
- Represent a loan to a company or government
- Debt holders receive regular interest payments and are repaid the principal at maturity
- Lower risk than equity investments
Real Estate
- Investing in physical property can provide rental income and potential capital appreciation
- Can be illiquid and require significant capital
Other Investments
- Include commodities, precious metals, and alternative assets
- Can offer portfolio diversification but often involve higher risk and less transparency
Key Considerations
- Investment goals – Determine financial goals such as retirement planning, education, or purchasing a home
- Risk tolerance – Understand the level of risk you are comfortable taking with your investments
- Time horizon – Consider how long you plan to invest for, as it will impact your investment strategy
Asset Classes
- A group of investments with similar characteristics and behaviour
- Help with portfolio diversification, as different asset classes react differently to economic conditions
Major Asset Classes
- Equities - Stocks
- Bonds
- Cash
- Real Estate
- Commodities - Raw materials like oil, gold, and agricultural products
- Alternative Investments - Private equity, hedge funds, and venture capital
Importance of Diversification
- Investing in a variety of asset classes helps to reduce risk
- Diversification helps to avoid putting all of your eggs in one basket and mitigates losses during market fluctuations
Key Considerations
- Asset allocation is the process of deciding how to allocate your portfolio among asset classes, influencing your returns
- Regularly rebalance your portfolio to maintain your desired mix of assets.
Share: Concept and Types, Participants in the Share Market
- A share represents ownership in a company
- Equity shares and preference shares are the two main types of shares
Equity Shares
- Also called ordinary shares
- They provide ownership rights in the company
- Higher risk as shareholders bear the highest risk
- Voting rights on company matters
- Dividends are a proportion of profits
- No fixed dividend
- Liability is limited to the amount of investment
Types of Ordinary Equity Shares
- Authorised share capital: Maximum amount a company can issue
- Issued share capital: The portion offered to investors
- Subscribed share capital: Portion investors accept and agree to
- Paid-up capital: Portion investors pay for
- Right share: Issued to existing shareholders to protect ownership rights
- Bonus share: Issued as dividends to shareholders
- Sweat equity share: Issued to employees or directors for exceptional performance
Types of Preference Shares
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Cumulative and non-cumulative preference shares:
- Cumulative: Unpaid dividends are carried forward and accumulated.
- Non-cumulative: Unpaid dividends are not carried forward.
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Participating and non-participating preference shares:
- Participating: Shareholders participate in remaining profits after equity shareholders are paid.
- Non-participating: Shareholders do not participate in the profits.
- Convertible and non- convertible preference shares: Shareholders have the option to convert preference shares into equity shares.
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Description
Explore the fundamental differences between saving and investing in this quiz. Learn about various types of investments such as equity, debt, and real estate, along with their associated risks and benefits. Understand the key considerations involved in making informed financial decisions.
