BUSINESS STUDIES
GRADE 12
CHAPTER 8: INVESTMENT
When evaluating different investment opportunities, criteria are
used to determine the most suitable option:
Risk
Return on investment (ROI)
Time frames
A. Risk:
High-risk investments typically deliver higher returns if
successful but can result in significant losses if they fail.
Example: Betting money on a roulette table—if it lands on
red, there is a high return, but if it lands on black, the entire
investment is lost (zero return).
Diversification: Spreading investments across various assets
to reduce risk.
Investors can choose the level of risk appropriate to their
situation.
B. Return on Investment (ROI):
ROI measures the efficiency of an investment and indicates
the return received over the original amount invested.
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, C. Time Frames:
The longer the investment period, the greater the risks an
investor can afford to take.
Example: A 20-year-old can afford higher risk investments for
retirement as they have 45 years to recover potential losses,
whereas a 50-year-old has less time.
Investment Strategies:
1. Growth Investment Strategy:
o High risk, focused on long-term capital growth rather
than monthly income.
o Example: Shares on the JSE (with blue-chip shares
reducing risk).
2. Balanced Investment Strategy:
o Medium risk, aiming for capital growth and some
monthly income.
o Combination of equities and interest-bearing
investments like fixed deposits or property investments
with rental income.
3. Defensive Investment Strategy:
o Low risk, focuses on monthly income with some capital
growth.
o Investments in property and money in the bank
(savings), with small investments in equities.
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GRADE 12
CHAPTER 8: INVESTMENT
When evaluating different investment opportunities, criteria are
used to determine the most suitable option:
Risk
Return on investment (ROI)
Time frames
A. Risk:
High-risk investments typically deliver higher returns if
successful but can result in significant losses if they fail.
Example: Betting money on a roulette table—if it lands on
red, there is a high return, but if it lands on black, the entire
investment is lost (zero return).
Diversification: Spreading investments across various assets
to reduce risk.
Investors can choose the level of risk appropriate to their
situation.
B. Return on Investment (ROI):
ROI measures the efficiency of an investment and indicates
the return received over the original amount invested.
1
, C. Time Frames:
The longer the investment period, the greater the risks an
investor can afford to take.
Example: A 20-year-old can afford higher risk investments for
retirement as they have 45 years to recover potential losses,
whereas a 50-year-old has less time.
Investment Strategies:
1. Growth Investment Strategy:
o High risk, focused on long-term capital growth rather
than monthly income.
o Example: Shares on the JSE (with blue-chip shares
reducing risk).
2. Balanced Investment Strategy:
o Medium risk, aiming for capital growth and some
monthly income.
o Combination of equities and interest-bearing
investments like fixed deposits or property investments
with rental income.
3. Defensive Investment Strategy:
o Low risk, focuses on monthly income with some capital
growth.
o Investments in property and money in the bank
(savings), with small investments in equities.
2
