SYLLABUS
the range of investment options
research the range of options and identify appropriate
options for individuals in different situations
construct an investment plan for an individual
risk and return
assess the relationship between risk and return for a
range of investment options
examine expenses arising from particular investment
options
RANGE OF OPTIONS
• Investment accounts
• Cash management
• Term Deposits,
• Shares
• Property
• Managed Funds
• Superannuation
QUESTIONS TO ASK YOURSELF BEFORE INVESTING
EXAMPLE PLAN OF GOALS & INVESTING
CASH MANAGEMENT
• A cash management account is similar to a normal statement
savings account in that funds can be withdrawn and deposited
whenever you like.
• The differences are that it will pay a much higher rate of interest
and there is usually a substantial minimum amount that must be
kept in the account; for example, $5000.
• Internet accounts can be accessed only through the internet.
• They offer higher rates of interest, few statements and lower
fees. They tend to make excellent investment accounts, but have
limitations as an everyday access account.
TERM DEPOSITS
•
A term deposit is a sum of money deposited with a financial institution that must
be left there for a set period of time (the term) in order to receive higher rates of
interest in return.
•
You cannot withdraw or add to the deposit if you wish to retain the higher interest
rates.
•
Most term deposits give you the choice of when the interest is paid, either
monthly or when the term expires (this is called ‘at maturity’).
•
Term deposits are for people who wish their money to be very safe and who are
also seeking a reasonable level of return
SHARES
• A share is a part ownership of a public company.
• Shares are bought and sold on the stock exchange.
• The price of a share constantly changes and if the price rises,
you may make a profit if you sell the share.
• A shareholder may also receive a dividend.
• This is the part of the firm’s profit that is divided among
shareholders.
• To purchase shares you may use a stockbroker, who specialises
in buying and selling shares for a fee, or you may trade online
with an internet broker, such as CommSec.
• Online trading is cheaper than using a stockbroker, but
stockbrokers do generally offer a greater depth of knowledge
and advice.
PROPERTY
• This tends to be the largest individual purchase a person will
make.
• Purchasing your own property has advantages, such as no longer
having to pay rent, and when your property is sold, any profits
from its increase in value are not taxed.
• Apart from owning a home to live in, many people purchase an
investment property with the intention of renting it out. This
provides advantages including the income from the rent, the
probability of the property increasing (appreciating) in value and
taxation benefits.
MORTGAGES
Banks and other lenders lend a percentage of the value of the
property in the form of a Mortgage.
 This means the property is promised to the Mortgagee (lender)
until the Mortgagor (borrower) is able to pay back the loan.
 The property is collateral for the loan.
 Mortgages may be taken over a relatively long period of time; often
over 25 – 30 years. This can, however, can be paid out earlier.
MORTGAGES TYPES
Loans involve a choice of rates.
 A Fixed Interest Rate remains the same for the period of the loan.
 Fixed loans give you greater control over your finances, because
the repayments remain the same for the fixed period of the loan.
 A Variable Interest rate moves up and down depending on the
market.
 With a variable rate, you are at the mercy of the financial market.
 During the 1980s, many people had great financial difficulty
when the interest rates on their loans increased to over 18%
MANAGED FUNDS
• A managed fund is made up of a pool of money that
comes from many people who have similar investment
goals.
• A professional fund manager invests this money in
assets such as shares or property.
• A managed fund allows a small investor to be involved
in the share market and real estate.
SUPERANNUATION
• A superannuation fund is a managed fund designed
specifically to produce benefits when people retire
from work.
• Employers pay approximately 9% for each employee to
a superannuation fund and employees contribute a
small percentage of their income into the fund.
• When employees retire from work, they receive either
a pension or a lump sum payment from the
superannuation fund.
RISK VS. RETURN
Risk
 The probability that an actual return on an investment
will be lower than the expected return
 Factors influencing risk include investor confidence,
interest rate uncertainty and unexpected changes in
the financial market
Return
 Yield generated by an investment, expressed usually as
a percentage of the amount invested
 In general, the greater the level of risk, the higher the
potential return on an investment will be
RISKS OF INVESTING
RETURN ON INVESTMENT
• Expressed usually as a percentage, ROI is a measure of
profitability that indicates whether or not a company is
using its resources in an efficient manner
Students are to take on the role of a reporter for the financial review.
They are to research and begin writing a news article on the current global economic
situation and the impact that this may have on both long and short-term
investments.
Students will have two periods to finish this activity.