HM 2A

INTRODUCTION TO
INVESTMENT

Group 1
 1. Compare and contrast the
different types of investments

2. Differentiate investment

LEARNING according to its type and

features

OUTCOMES 3. Enumerate advantages and

disadvantages of the different
types of investment

4. Evaluate and list ways to

minimize or reduce investment
risks in simple case problems
INTRODUCTION
Investing is a process of making
money grow and have a return. But
in every type of investment, each
has its own level of risk and return.
The higher the potential return on
top of the investment, the higher
the risk or uncertainties that even
the investment aside from the
promised return will not be
recovered.
 ADVANTAGES

Investing is the process of letting the money work instead of

working hard for the money. It will only be through investing
earned money from employment that makes available needed
funds after retirement. Determining a good return on an
investment can maximize earning potential.
 DISADVANTAGES

The major disadvantage of investing is the possibility of

losing money on whatever investment opportunities.Even
the prices of real estate which is traditionally the most
secure investment are not a guaranteed return unless there
are takers or buyers.
 TYPES OF
INVESTMENTS
1. INVESTING IN A BANK

Investing money in a bank is an investment option

either in a savings account, where it will accrue a
small amount of interest or in certificate of time
deposits with higher interest rates but contains
some serious restrictions on its withdrawal.
1. 1. IN SAVING ACCOUNT

Excess funds can be deposited in a savings

account in any bank. Aside from safety, the
money saved in a bank earns minimal interest
which makes it not the best option for long-term
growth.
1. 2. TIME DEPOSIT

Excess funds can be placed in time deposits for

higher interest rates, but should not be
withdrawn within the fixed period to avoid
reverting to savings interest rate.
 ADVANTAGE

Security - one of the advantages of investment or financial

tools available at a bank is actually about security. The
money invested in any bank is safe, whether in a savings
account, time deposit or money market account.
 DISADVANTAGE

Returns - The security being provided Liquidity - can be either an advantage

in bank investments is balanced out or a disadvantage. It is an advantage if
by the painfully lower returns on the investment is in a savings account.
these financial services. Some banks While savings accounts earn small
returns, it has access to money i a
have no interest for checking.
savings account at any time.
2. INVESTMENT IN BONDS

A bond is like an IOU (I owe you) issued by a

government, or by a company with profitable tract
record. The public or anybody will lend money for
a number of years with an agreement that it will
be paid fixed interest rate called a coupon.
 ADVANTAGE

Investing in bonds has been considered one of the

safest ways to make money considering the fixed
interest.
 DISADVANTAGE

Investing in a bond is always with a fined term

ordinarily more than a year
3. INVESTMENT IN SHARES
OF STOCK
Investment in shares of stock is like buying a small part of a
company. If that company makes money, it will be distributed to
each share through dividends The share market prices are
generally expected to go up over time and give a 'capital gain' on
its original investment aside from the dividends received.
However, share market prices can fall in value depending on the
performance of the company.
 ADVANTAGE

Owning stocks has been the best way historically to build

wealth. However, stock prices fluctuate with a company's
income performances and also affected by economic factors.
Aside from the share in profits in the form of dividends, there is
a possibility of a capital gain when increases in the stock prices
in the market
 DISADVANTAGE

Dividends or share in profit will be dependent on the board of

directors declaration which means that corporation cannot be
obliged to give dividends every year. In case of liquidation,
owners of shares of stock are not a priority but it is the outside
creditors who will be given first the right over the remaining
assets of the company.
4. MUTUAL FUNDS

A managed funds is a financial product that buys

a number of shares and other investments such as
property, term deposits, and cash. The buying
decisions are made by fund managers who are
expert in this field.
 ADVANTAGES
OF MANAGED FUNDS

Managed funds have plenty to offer investors. Here

are some the advanatages of this types of
investments.
1. DIVERSIFICATION

This means that investors who don't have

enough money can have the opportunity to buy
different types of investments through pooling of
funds of other investors. By pooling funds of other
investors, a mutual fund buyer will be able to
access a wide array of diversified securities.
 2. EASY FOR NOVICES TO GET INVOLVE

It is not needed to be a sophisticated investor

to buy a managed fund. So many different types
of funds are available that it can be relatively
easy to find one that matches the investment
needs. Typically, buy or sell of fund shares is
done on any business day.
3. CONVENIENCE

Mutual funds are a comprehensive

package containing various investments,
making daily price tracking and fund sales
easy through newspapers or online
platforms.
 4. FUND MANAGEMENT

A professional fund manager manages

mutual fund investments, benefiting starting
investors with minimal investment. They
monitor daily investments and make strategic
moves to achieve fund objectives.
5. INVESTMENT AMOUNT

Mutual funds have a minimum investment of

P10,000, compared to other funds with a minimum of
P100,000 and above. Systematic investing plans
allow small monthly or quarterly contributions,
reducing emotion and automatic transfers to
investors' bank accounts.
DISADVANTAGES
OF MANAGED FUNDS

Understanding the Negative Aspects of

Mutual Fund Investment
1. FEES

For hiring a professional money manager,

which can be confusing due to various
costing methods, including front-end sales
charges, ongoing anriual fees, and back-end
loads payment.
 2. PERFORMANCE IS NOT GUARANTEED

Professional mutual fund managers may

lose money, despite their past track record,
during market downtime, despite the fact
that mutual funds are professionally
managed.
3. LACK OF CONTROL

The invested money is being handed

over completely to the control of a
stranger. There's nothing that can be done
to stop the fund manager from selling or
buying decision.
 4. TAXATION

Mutual funds are required by law

to pay out any dividends and capital
gains which are taxable
5. REAL ESTATE INVESTMENTS

Real estate refers to any permanent structure or

property that is connected to land. There are five
categories under real estate: residential, commercial,
industrial, raw land, and special use.
 ADVANTAGE

It is considered as the safest among the group since

it will surely increase its value over time. It could also
be utilized to generate profit while searching for the
right buyer. Lastly, the owner has full control over
the property and can even be passed on to someone.
 DISADVANTAGE

It takes a whole lot of time before you can find

anin interested buyer, while the profit that comes
Foreign investment plays an important
role economic growth, especially
from this investment
because foreign investment provides
much-needed additional capital for
could only be obtained
once
developing it's sold
countries or
to accelerate
economic development
either utilized in its selling
phase.
 OTHER
ALTERNATIVES
Alternative investments include:
• Private equity
• Hedge funds
• Fine wine
• Exotic cars
• Stamps
While these assets can offer unique investment opportunities,
their value can fluctuate, like any investment.
 WAYS AND MEANS
TO MINIMIZE
INVESTMENT RISKS
 Investments are classified by
risk and return—higher returns
typically come with higher risk,
but not always. Greater risk
doesn't guarantee higher reward;
sometimes it just means more
risk with little return.
Understanding and managing risk
is crucial to ensure it stays within
acceptable levels.
1. DETERMINATION OF TOLERANCE TO
DIFFERENT KINDS OF RISK
All investments carry risk, but understanding the types
and combinations of risks is key to managing them.
Risk tolerance is influenced by:
Net worth (assets minus liabilities) and Risk capital
(money that can be lost without affecting financial
stability)
Higher net worth and risk capital allow for greater risk
tolerance, while modest net worth and limited risk
capital suggest a more conservative approach.
2. CONDUCTING DUE DILIGENCE
This means making research about the investment
instruments before finalizing the investment plan.
Checking out the investment's history, earnings'
growth, management team and debt load will
provide more information about the investment
portfolio.
The data about the stock's price-to-earnings ratio
or P/E ratio will measure the relationship between a
company's stock price and its annual after-tax
earnings.
3. DIVERSIFICATION OF INVESTMENT
PORTFOLIO
Diversification of investment portfolio
is the risk management strategy of
combining a variety of assets to reduce
the overall risk of an investment
portfolio.
Purpose and Benefits
Portfolio risk management.
Diversification of an investment portfolio also
lowers its volatility as movements or changes are
not expected to happen at the same time in all
asset categories, industries, or stocks.
The portfolio's instability decreases because
different asset prices can fluctuate at various
times. This results to a well balance risk and
return or risk is spread over a variety of products.
For example, investment money can be made as
follows:
A. 25 percent into ABC stock;
B. 25 percent into time certificate of deposit;
C. 25 percent into Treasury bonds; and
D. 25 percent into real estate.
Outcome
Profit is realized when there will be an increase in the
market price of stock of ABC Company. But this profit
potential is reduced by the fact that only a portion of the
money is invested in said stock. However, if ABC Company
fails, the loss.
4. MONITORING OF INVESTMENTS

Regular reallocation of resources is

necessary for control purposes. Proper
allocation of the investments depends on
such factors as age, investment period and
investment temperament.
5. TAKING ADVANTAGE OF GOVERNMENT
GUARANTEED INVESTMENT PRODUCTS
It is very safe to invest in an instrument which is
guaranteed by the government like Treasury bonds.
These securities are fully backed by the Philippine
government aside from an insurance from the
Philippine Deposit Insurance Corporation. In
addition, holding investment until its maturity is
better than early withdrawal considering the
market risks and penalties except for a secured
recovery of principal and interest.
THANK YOU
FOR LISTENING!
 GROUP MEMBERS
Jacobo, Ma. Jezzabelle
Alayon, Antonia
Martines, Kurt Justin
Aguila, Daniela
Masaudling, Shyna
Batoy, Aira Mae
Mendez, Justine
Dela Pena, Honeylyn N.
Mendoza, Gio Yram
Dela Rosa, Roshelle Ann
Pieda, Jade T.
Ferreras, Michaela Q.
Ricaplaza, Gabriela
Hernandez, Mark James
Rubio, Mia