Investment and Risk Management Lesson 1 Midterm PDF

INVESTMENT AND RISK MANAGEMENT LESSON 1_MIDTERM_Week 2 SVP JULIO D. CLIMACO, JR. Corporate Services Sector Teresa Denise B. Dugay-Gregorio, CPA, CISA, DBA INTRODUCTION TO INVESTMENT  Topic Outline 1. History 2. Definition and Objectiv...

INVESTMENT AND RISK MANAGEMENT LESSON 1_MIDTERM_Week 2 SVP JULIO D. CLIMACO, JR. Corporate Services Sector Teresa Denise B. Dugay-Gregorio, CPA, CISA, DBA INTRODUCTION TO INVESTMENT  Topic Outline 1. History 2. Definition and Objectives 3. Types 4. Risk and Return 5. Features/Natures/Characteristics  Investment: History According to historical accounts: ‒ Investing can be traced back to the Code of Hammurabi, which was written around 1700 BCE in Mesopotamia (modern day Iraq). ‒ Historians argue that the historic code provided the framework for many of civilization's essential laws, including the legal framework for investment. ‒ The art of investing has been practiced since the dawn of Homo eco nomicus. ‒ Investing in its earliest form can be linked to the risk/reward decisions of long- distance trading. During the late Pre- Pottery Neolithic period in the prehistoric Middle East, between 9500 and 8500 BCE.  Investment: Definition Saving vs. Investing Saving: – The money you earn but don’t spend. – Savings made through delayed consumptions. Investing: – Making that money grow – The application of money for earning more money. Investment: Definition Saving vs. Investing Investment: Definition Saving Investment: Definition Investment: Definition according to Economist - Refers to any physical or tangible asset. - The utilization of resources in order to increase income or production output in the future. Investment: Definition according to Economist  Investment: Definition according to Finance - Refers to the buying of financial product or any valued items with anticipation that positive returns will be received in the future. Investment: Definition according to Finance Investment: Types Investment: Types Investment: Types  Investment: Types 1. Ownership Investments – This type of investment works by contributing to a company’s capital. – Ownership depends on the number of assets you put into the company. – Ownership investments are computed at the end of each year with an increase in your contribution which earned profit or interest. You put in money and earn as the company grows or profits over time. – They’re the most profitable, but they’re also considered to be the riskiest. – Examples of ownership investments are: Stocks – makes you a part owner of a company, giving you the right to a portion of the company’s value and income. Business - Entrepreneurship focuses on the creation of a product or service that you can sell to others. Real estate - Buying a piece of land or property. Appreciation in value. Earn money by renting it out or reselling it. Precious metals and collectibles - Gold, paintings, and signed limited edition merchandise are all examples of ownership investments. Value appreciation.  Investment: Types 2. Lending Investments – are considered less volatile and low risk because you can take your money back anytime. – Some examples of lending investments: Bonds - When you purchase a bond, you loan money to a corporation or an organization, and you get paid with a fixed interest rate. Certificate of Deposits - Issued by banks as proof that you have agreed to leave a certain amount of money with them. CDs require you to leave your money with the bank for a certain period. Savings accounts - The most popular form of lending investment and perhaps the most feasible investment for beginners due to its simplicity and accessibility is the savings account. Compared to other types of investments, the returns are usually lower.  Investment: Types 3. Cash Equivalents – These are investment assets that are the total value of cash on hand that includes items that are similar to cash. – Short-term investors would benefit from cash equivalents, which are the least risky of all investment types. – Examples: Treasury Bills - T-Bills are issued by the government and you can usually invest with a minimum of ₱50,000. Commercial Papers - These are issued by SEC-registered Philippine corporations to fund short-term obligations like inventory purchases and payrolls. Certificates of Deposits - CDs are debt instruments that earn interests and are much similar to time deposits. Investment: Feature/Nature/Characteristic Investment: Feature/Nature/Characteristic Investment: Feature/Nature/Characteristic large number of factors Investment: Feature/Nature/Characteristic Investment: Feature/Nature/Characteristic kakambal Investment: Feature/Nature/Characteristic Investment: Risks and Returns Investment: Feature/Nature/Characteristic Investment: Feature/Nature/Characteristic  Investment: Feature/Nature/Characteristic 4. Liquidity – Refers to an investment ready to convert into cash position. – It is available immediately in cash form. – Investment is easily realizable, saleable or marketable. When liquidity is high then the return may be low. Safety of funds through a minimum risk and maximization of return from an investment. Investment: Feature/Nature/Characteristic Investment: Feature/Nature/Characteristic Investment: Feature/Nature/Characteristic Investment: Feature/Nature/Characteristic end Investment: Activity/ies Look around your house or your own belongings: 1. Identify 5 items you considered as investment items and why? 2. Identify 5 items you considered as items for savings and why? 3. For the investment items identified indicated their risk and returns. Investment Items Risk Returns Thank you...