Self-Study Notes
Created by Chantelle. B
Chapter 8- Investments
Criteria can be used to determine most suitable option
- Risk
- ROI (Return on Management)
- Time Frame
Risk:
Higher risk, higher ROI
If high risk investment falls = BIG LOSS
Diversification: Don’t keep all eggs in one basket-
Combination of investment options to spread risks over different assets
ROI:
- Tool to measure efficiency of investment
- Indication what will be given back
Time Frame:
- The longer the investment, the more risks there are of what investor can afford to
take
Investment Strategies:
- High risk
Growth - Long term capital growth
- Shares on JSE are considered with blue chips
- Medium risk
- Long term capital growth, with some monthly income
Balanced
- Combination of equities/ fixed deposits/ investments in property
with monthly income
- Low risk
Defensive
- Monthly income , with a little capital growth
- No risk wanted
Conservative - Monthly income while maintain capital amount
- Will be in property and cash investments
, Self-Study Notes
Created by Chantelle. B
Investment options:
1. Equities/Shares
Listing on JSE:
Listed:
- Information on shares’ performance is available
Unlisted:
- No information on financial performance to anyone but shareholder’s/ bank/ creditors/SARS
• Owner of shares own a position in business.
• Two methods to becoming a shareholder:
1. Shares bought when company was issued, thus person who bought shares contributed capital
2. Shares were bought on JSE (shares bought + sold font impact capital of business
à Risk:
- JSE has strict rules for companies to list on stock exchange to protect investors
(high/moderate risk)
- Blue chip shares: risk of acquiring is smaller than having shares in other companies
(ROI is higher in blue chip companies)
Investors rake smaller risks than people with shares
à ROI:
2 factors that contribute:
1. Increase in share price
2. Dividends
Shareholder’s buy shares with expectation that:
- Price will increase over time
- Dividends (profits that are divided among shareholders) are generated
What determines demand and supply?
8. Level of confidence in economy: When economy is well, investors will be
positive.
8. Government policies/ legislations: Share prices will drop when shareholders sell
8. Industry Performance: Some may be more attractive than others
8. Financial Performance: sales, ROI, profits, liquidity, solvency
8. Confidence in management team: increased prices
8. Social issues: Image, in terms of environmentally friendly
8. Legal issues: pending lawsuits/ allegations
8. Media Coverage: increased awareness of company
à Time frame:
- Some are short term with no need for capital growth
- Investors with blue- chip shares are long term
Created by Chantelle. B
Chapter 8- Investments
Criteria can be used to determine most suitable option
- Risk
- ROI (Return on Management)
- Time Frame
Risk:
Higher risk, higher ROI
If high risk investment falls = BIG LOSS
Diversification: Don’t keep all eggs in one basket-
Combination of investment options to spread risks over different assets
ROI:
- Tool to measure efficiency of investment
- Indication what will be given back
Time Frame:
- The longer the investment, the more risks there are of what investor can afford to
take
Investment Strategies:
- High risk
Growth - Long term capital growth
- Shares on JSE are considered with blue chips
- Medium risk
- Long term capital growth, with some monthly income
Balanced
- Combination of equities/ fixed deposits/ investments in property
with monthly income
- Low risk
Defensive
- Monthly income , with a little capital growth
- No risk wanted
Conservative - Monthly income while maintain capital amount
- Will be in property and cash investments
, Self-Study Notes
Created by Chantelle. B
Investment options:
1. Equities/Shares
Listing on JSE:
Listed:
- Information on shares’ performance is available
Unlisted:
- No information on financial performance to anyone but shareholder’s/ bank/ creditors/SARS
• Owner of shares own a position in business.
• Two methods to becoming a shareholder:
1. Shares bought when company was issued, thus person who bought shares contributed capital
2. Shares were bought on JSE (shares bought + sold font impact capital of business
à Risk:
- JSE has strict rules for companies to list on stock exchange to protect investors
(high/moderate risk)
- Blue chip shares: risk of acquiring is smaller than having shares in other companies
(ROI is higher in blue chip companies)
Investors rake smaller risks than people with shares
à ROI:
2 factors that contribute:
1. Increase in share price
2. Dividends
Shareholder’s buy shares with expectation that:
- Price will increase over time
- Dividends (profits that are divided among shareholders) are generated
What determines demand and supply?
8. Level of confidence in economy: When economy is well, investors will be
positive.
8. Government policies/ legislations: Share prices will drop when shareholders sell
8. Industry Performance: Some may be more attractive than others
8. Financial Performance: sales, ROI, profits, liquidity, solvency
8. Confidence in management team: increased prices
8. Social issues: Image, in terms of environmentally friendly
8. Legal issues: pending lawsuits/ allegations
8. Media Coverage: increased awareness of company
à Time frame:
- Some are short term with no need for capital growth
- Investors with blue- chip shares are long term
