Senior
High School
Senior High
School
Senior High School
Business Finance
Quarter 2 – Module 5: The definition,
purpose, kinds, advantages, and
disadvantages and the risks of
investment
Lesson 1 – The Different Types of Investments.
Writer:
ROSARIO D. LOPEZ
MT-I Becuran High School
Editors:
JANE P. VALENCIA, EdD – Math/ABM Supervisor
CHAIRMAN
ELSA A. LAQUINDANUM – MT- I
CHRISTINA P. SANTOS – MT- I
What I Need to Know
This module was designed and written with you in mind. It is here to help you master the
Different Types of Investments. The scope of this module permits it to be used in many
different learning situations. The language used recognizes the diverse vocabulary level of
students. The lessons are arranged to follow the standard sequence of the course. But the
order in which you read them can be changed to correspond with the textbook you are now
using.
After going through this module, you are expected to:
1. Compare and contrast the different types of investments.
2. Differentiate investment according to its type and features.
3. Enumerate advantages and disadvantages of the different types of investments.
What I Know
True or False: Write True if the statement is correct and False if it is wrong.
___________________1. The decision to establish an investment plan is an important
first step to accomplishing your financial goals.
___________________2. There are two types of stocks – common stocks and preferred
stocks.
___________________3. A short-term investment objective is defined as one that will be
be accomplished within a period of two to five years.
___________________4. An emergency fund is a certain amount of money that can be
obtained quickly in case of immediate need.
__________________ 5. Stock prices fluctuate due to competition and movements in
market prices.
__________________ 6. Liquidity is the ease with which an asset can be converted to
cash without substantial loss in peso value.
__________________7. Preferred stock represents the most basic form of corporate
ownership.
__________________8. A line of credit is a short-term loan that is approved before the
money is actually needed.
__________________9. One of the major assumptions in investment is that investors
base their decisions strictly on expected return and risk factors.
__________________10. Bondholders generally receive interest payments every six
months.
Lesson The Different Types of
Investments
1
An investment is any type of asset that is acquired by an investor with the
intent to utilize it to generate income and eventually accumulate wealth. Finance
professionals view investment as a monetary asset, like a bond, a stock or any type
of financial instrument which is purchased and in due time will be sold, hopefully at a
higher price.
For instance, if the stocks were bought at P200 per share and after one year the
investor was able to sell them for P300 per share, then the investor would have earned
P100 per share. If there is a total of 1,000 shares, then the profit would be P100,000.
What’s In
Stretch Your Financially Inclined Mind
Arrange the jumbled words below to find the terms being described by the clues provided
below. These finance terms and concepts will be useful for you as you study the lessons
for this module.
1. RUNSTER
= _______________
2. DAMAGEN NUDFS
= _______________
3. REVFITINOSAIDIC
= _______________
4. REDHASHEROL
= _______________
5. DILEY
= _______________
Here are your clues:
1. It is the amount of money earned from investments.
2. Are companies or trust funds that pool money from various investors through a
fund manager, who in turn, invests that collected money in stocks, bonds, or a
combination of various investments. Managed funds
3. 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.
4. Someone who invest in the stock of a business.
5. The return that you would expect if you hold the bond for a year and is expressed
in percentage.
Notes to the Teacher
The teacher must take into considerations the essential
skills needed in the development of this competency
including the background knowledge which may reinforce
learning. This module will help the learners link the gap of
learning to achieve mastery of the lesson.
What’s New
FINDING WORDS:
Let’s raise your level of investment skills. Draw a line connecting the letters to form
words suggested in the box.
1. Preferred
2. Securities
3. Investments
4. Bonds
5. Funds
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What is It
Different Types of Investments and their Features:
Types of Investments
Features
1. Investing in a Bank
Earns minimal interest, easily withdrawable, least
1.1 Savings account
risky, insured with PDIC up to P500,000.
1.2 Time deposit
Higher interest, withdrawal after the fixed time, i.e.
90days, one year, etc.,
2. Investment in Bonds
Like an IOU (I owe you) issued by a government or
company with fixed interest rate-called coupon.
3. Investment in Shares
Like buying a small part of a company, earnings
of Stocks
through dividends and capital gains as price increases.
4. Managed funds
An investment company, which pools the money of
various investors and invest that money in bonds,
stocks or a combination of various investments.
5. Investment in Property
Can either be real property (real estate) or tangible
personal property (gold, precious metals, artworks,etc.)
Advantages and Disadvantages of the Different Types of Investments:
Types of Investments
1. Investing in a
Bank
Advantages
Disadvantages
Security-insured by PDIC
Lower returns – 1% or less for
Liquidity for savings account
savings, 2-3% time deposits
Liquidity for time deposits
2. Investment in
Bonds
Safest - with fixed interest
With fixed term cannot be
Lending money to a company withdrawn before maturity or
for expansion of business, at a lower amount.
which
contributes
to
economic growth
3. Investment in
Share in profits in the form of Dividends
dependent
on
Shares of
dividends
Stocks
Capital gains due to increase During liquidation, creditors
in market prices
board declaration
have first claim on assets
4. Managed funds
Diversification, ease of entry, Fees,
convenience,
management
performance
not
fund guaranteed, lack of control,
and
low taxation
investment amount.
5. Investment in
Property
Price appreciation for real Long term process for profits
property. Safest investment
to be realized.
What’s More
Types of Investments: As depicted by the image, choose which of the following is your
investment option and explain your answer by highlighting its features and
advantages:
What I Have Learned
1. An investment is any vehicle into which funds can be placed with the
expectation that they will generate positive income and/or increase in value.
2. The following are types of investments: investing in banks, bonds, shares of
stocks, managed funds and investment in property.
3. Each type of investment has its own unique features , advantages and
disadvantages in terms of security, returns, terms, liquidity , diversification,
convenience, fees and taxation.
4. There are a lot of types of investment to choose from. Some are perfect for
beginners, while others require more experience. Each type of investment offers
a different level of risk and reward.
5.
Investors should consider each type of investment before determining an asset
allocation that aligns with their goals.
What I Can Do
Case Study
Your mother, who is an OFW, is coming home in six months. The last time you
spoke to her via online video call, she asked you to suggest three small businesses to
invest in. She said that she has allotted P500,000 as capital that would be divided
between the three businesses that you will recommend. You scribbled some possible
businesses and came up with the following options:
Possible Business
Estimated Initial Capitalization
1. Barbershop
P 180,000
2. Beauty parlor
140,000
3. Buy and sell of ready-to-wear clothes
75,000
4. Carinderia
5. General merchandise store
90,000
150,000
6. Milkshake business
75,000
7. Pizza stand franchise
120,000
8. Siomai stand franchise
200,000
9. Small bakery
200,000
10. Small grocery store
100,000
Draft an e-mail for your mother containing the following:
1. The top three recommended businesses that you would recommend to your mother.
2. Give at least three reasons as to why you chose the business you have
recommended, which include your opinion on which you think would be most
profitable, feel free to quantify your opinion if you wish but this is not necessary.
3. Give at least two disadvantages for each business recommended.
Assessment
Multiple Choice. Encircle your answer.
1. What is a bond?
A. It is a security that represents partial ownership in a business.
B. It is a security that represents the debt of a government or a business that
promises to pay a fixed amount.
C. It is a security that represents the equity of a government or a business
that promises to pay a fixed interest.
D. None of the above.
2. Which is TRUE of money market mutual funds?
A. Enable individuals and small businesses to invest indirectly in moneymarket instruments.
B. Are available only to high net-worth individual
C. Are involved in acquiring and placing mortgages
D. Are also known as finance companies
2. A business owned by two or more people and operated for profit.
A. Cooperative
C. Partnership
B. Corporation
D. Sole Proprietorship
3. An entity created by law owned by shareholders. Overall objective of a
shareholder should be wealth maximization
A. Cooperative
C. Partnership
B. Corporation
D. Sole Proprietorship
5. Rational investors will seek efficient portfolios because these portfolios are
optimal based on:
A. Expected return
C. Risk
B. Expected return and risk
D. Transaction cost
6. Most investors are assumed ____________________.
A. Risk averse
C. Risk moderators
B. Risk neutral
D. Risk seekers
7. Based on recent history, an investor would probably have a lower risk level with
portfolio consisting of ________________________________________.
A. All bonds
C. Impossible to tell
B. All stocks
D. Some stocks and some bonds
8. Who will decide on the declaration of dividends in a corporation?
A. The board of directors of the firm
B. The president of the company
C. The shareholders of the corporation
D. The stock exchange on which the stock is listed
9. What is the difference between shares and bonds?
A. Bonds represent ownership whereas shares do not.
B. Shares and bonds both represent equity.
C. Shares and bonds both represent liabilities.
D. Shares represent ownership whereas bonds do not.
10. How should one think of stocks?
A. One should not think of stocks as being synonymous with a good business
B. One should think of stocks as pieces of businesses.
C. One should think of stocks as chips in the casino
D. Both A and B.
Additional Activities
Fast Learning Exercise:
Research Work:
Direction/Required: By group or individual
Font: 14, Times New Roman; Double Space, Minimum of 5 Pages
Format:
1.
Introduction
II.
Body
III.
Summary
IV.
References: If thru internet, please indicate the web site
Ex. https://en.wikipedia.org/wiki/Means _of_production
Book references:
Ex. Author, Title of the book, place published, year
Research topic:
Research on what is the most invested field from the year 2017 to 2018.
(Example: Real estate, stocks)
Answer Key
What I Know
1. True
6. True
2. True
7. False
3. False
8. False
4. True
9. True
5, True 10. False
What’s In
1. Returns
2. Managed Funds
3. Diversification
4. Shareholder
5. Yield
What’s More
Answers of students may vary
Additional Activities
Assessment:
Answer of students may vary
1.
2.
3.
4.
5,
B
A
C
B
A
6. A
7. A
8. A
9. D
10. D
.(
References
Gamatero, Albert N. (2017) Business Finance (1st edition) . Diwa Learning Systems Inc.
De Guzman, Angeles A (2019) Business Finance for Senior High School (1st edition)
Lorimar Publishing Inc..
Development Team of the Module
ROSARIO D. LOPEZ
– MT-I Becuran High School
JANE P. VALENCIA, EdD – EPS – Mathematics
JANE P. VALENCIA, EdD – EPS – Mathematics
ELSA A. LAQUINDANUM – MT-I San Isidro HS, Bacolor South
CHRISTINA P. SANTOS– MT-I SVSF HS
Illustrator:
ROSARIO D. LOPEZ
– MT-I Becuran High School
Layout Artist: ROSARIO D. LOPEZ
– MT-I Becuran High School
ELSA A. LAQUINDANUM – MT-I San Isidro HS, Bacolor South
CHRISTINA P. SANTOS– MT-I SVSF HS
Language Reviewer:
Writer:
Editor:
Reviewer:
Management Team
ZENIA G. MOSTOLES, EdD, CESO V, Schools Division Superintendent
LEONARDO C. CANLAS, EdD, CESE. Asst. Schools Division Superintendent
ROWENA T. QUIAMBAO, CESE, Asst. Schools Division Superintendent
CELIA R. LACNALALE, PhD, CID Chief
JANE P. VALENCIA, EdD, Education Program Supervisor, Mathematics
JUNE E. CUNANAN, Education Program Supervisor/ Language Editor
RUBY M. JIMENEZ, PhD., Education Program Supervisor, LRMDS