Summary Grade 12: Investment and Insurance

Investment &
Insurance

, Investment
Criteria of most suitable investments
RISK
- High risk = higher return
- Can result in big loss
- Diversification: spread risk over diff. assets
- Investor = chooses degree of risk relative to most suitable investment option
RETURN ON INVESTMENT (ROI)
- Tool to measure efficiency of investment
- Indicator of what investor will get back above original investment
TIMELINES (PERIOD OF INVESTMENT)
- Longer period = greater risks investor afford to take
Different Investment Strategies
GROWTH
- High risk
- Long-term capital growth
- Shares on JSE blue-chip shares = reduces risk factor
BALANCED
- Accept medium risk
- Aim: capital growth + monthly income
- Combination of equities & interest-bearing investment
- Fixed deposit (investment in property)
DEFENSIVE
- Low risk
- Emphasis monthly income and then capital income
- Investment in property, money in bank, smaller investment in equities
CONSERVATIVE
- No risk
- Focus on monthly income, maintaining capital amount investment
- Majority = property, cash instruments = monthly income
Equities/Shares
DESCRIPTION
- Companies listed on JSE -> Info on shares' performance = regularly available
- Unlisted -> not make info on financial performance available to anybody = impossible to evaluate acceptable
returns
- owners of shares = own a portion of the business
shares bought from company = issued for first time = person who bought shares contributes capital
bought on JSE from previous shareholder = money paid not going to business -> person who sold shares = no
effect on capital available to business
RISK
- JSE have strict rules to list -> protect investors = decrease risk
- Moderate -> high risk investment
- Blue-chip shares = high end companies = risk lower
- Investors take smaller risks than ppl speculating with shares