Kayla Humphries
Chapter 8 - Investment
Overwhelming to decide on investment option. Following criteria used to evaluate
each of the investment options:
• Risk
• Return on investment (ROI)
• Time frames
A. RISK
Higher risk investment expected to deliver higher return on investment IF the
investment succeeds. May also result in great loss if it fails.
Further idea related to risk = diversification = not all eggs kept in one basket.
Not ONE of the investment options is used to hold all reserves, but rather that a
COMBINATION of options is used to spread risk over different assets.
At the time, investor has the choice to choose degree of risk relative to the most
suitable investment option.
B. RETURN ON INVESTMENT (ROI)
The tool used to measure the efficiency of an investment. It is an indicator of what
the investor will get back over and above original investment made.
C. TIMELINES (PERIOD OF INVESTMENT)
Longer period available to investor = greater risks investor can afford to take.
If someone who is 20 wants to make provision for retirement, they have another 45
years to discover losses. However someone who is 50 wanting to make provision
has less time before retirement age = cannot afford to take many risks regarding
investments
Different investment strategies include:
, Kayla Humphries
Balanced Investment Strategy:
Growth Investment Strategy:
• Investor prepared to accept
• High risk
medium risk
• Long-term capital growth
• Aim = capital growth, with
instead of monthly income
monthly income as well
• Shares on JSE may be
• Combination of equities &
considered, with Blue-chip
interest-bearing investment
investments reducing risk
considered
Defensive Investment Strategy:
Conservative Investment Strategy:
• Low risk
• Investor wants no risk
• Emphasis on monthly
• Focus on monthly income,
income, investor wants
while maintaining capital
some capital growth too
amount of investment
• Investments in
• Most investment in
property/money in the
property/cash instruments
bank, smaller investment in
to generate monthly income
equities.
Investment in correct property =
capital growth
INVESTMENT OPTIONS/INSTRUMENTS:
Equities/shares:
Description:
• Equities also known as shares in a company – listed or unlisted.
• Look at listed companies when considering equities & shares
Chapter 8 - Investment
Overwhelming to decide on investment option. Following criteria used to evaluate
each of the investment options:
• Risk
• Return on investment (ROI)
• Time frames
A. RISK
Higher risk investment expected to deliver higher return on investment IF the
investment succeeds. May also result in great loss if it fails.
Further idea related to risk = diversification = not all eggs kept in one basket.
Not ONE of the investment options is used to hold all reserves, but rather that a
COMBINATION of options is used to spread risk over different assets.
At the time, investor has the choice to choose degree of risk relative to the most
suitable investment option.
B. RETURN ON INVESTMENT (ROI)
The tool used to measure the efficiency of an investment. It is an indicator of what
the investor will get back over and above original investment made.
C. TIMELINES (PERIOD OF INVESTMENT)
Longer period available to investor = greater risks investor can afford to take.
If someone who is 20 wants to make provision for retirement, they have another 45
years to discover losses. However someone who is 50 wanting to make provision
has less time before retirement age = cannot afford to take many risks regarding
investments
Different investment strategies include:
, Kayla Humphries
Balanced Investment Strategy:
Growth Investment Strategy:
• Investor prepared to accept
• High risk
medium risk
• Long-term capital growth
• Aim = capital growth, with
instead of monthly income
monthly income as well
• Shares on JSE may be
• Combination of equities &
considered, with Blue-chip
interest-bearing investment
investments reducing risk
considered
Defensive Investment Strategy:
Conservative Investment Strategy:
• Low risk
• Investor wants no risk
• Emphasis on monthly
• Focus on monthly income,
income, investor wants
while maintaining capital
some capital growth too
amount of investment
• Investments in
• Most investment in
property/money in the
property/cash instruments
bank, smaller investment in
to generate monthly income
equities.
Investment in correct property =
capital growth
INVESTMENT OPTIONS/INSTRUMENTS:
Equities/shares:
Description:
• Equities also known as shares in a company – listed or unlisted.
• Look at listed companies when considering equities & shares
