Key Terms 1
What are assets?
items of value
What is rate of return?
the profit you receive on your investment as a percentage of the original investment
What is the term used to describe the practice of only investing in certain companies whose products, policies and practices are in line with your own beliefs and values?
Ethical investment
What are ways that businesses can run ethically? Think of key concepts learnt in class.
the type of product a company sells, have safe working conditions, promote the use of trade unions, environmentally friendly and recyclable products/packaging, not creating excess waste
What is the golden rule of investing?
Don't invest money that you cant afford to lose.
Which dung beetle was worshipped by the ancient Egyptians?
Scarab
What is capital gains tax?
a tax on the profits arising from the increased value of assets such as shares or property
What is negative screening?
A person who avoids investing in some types of firms, for example, cigarette companies or firms that make alcohol.
Frodo invested $5000 in a fund that he cannot access until he retires. Which investment option is this an example of?
Superannuation
Outline TWO reasons why individuals invest.
Individuals invest their savings in order to achieve a future goal, such as the desire for extra income and future security, to pay for a major purchase, to fund a holiday, a child’s education, or to ensure a comfortable retirement. Individuals can also invest to save for their own education.
What is an investment account and how are they a form of investment?
It's a saving account. It's an investment because different accounts have different interest/rates of return. Some banks offer high rates of interest on savings over $5000 and if left untouched for a certain amount of time.
What pigment makes plants green?
Chlorophyll
What is part ownership in a company called?
Shares
What is a variable interest rate?
rate that moves up or down depending on market forces.
Gandalf invested $5000 in shares. He sold them one year later for $5500 and made a profit of $500.
What is his rate of return.
10%
Formula:
Profit from investment
_________________________ x 100
Original Value
Outline THREE ways individuals can finance their investment.
Individuals can finance their investment through:
– Savings — this is when individuals save up for an investment, which can take some time.
– Borrowing — individuals can borrow funds to pay for their investment. For example, they can get a personal loan or a home loan.
– Superannuation — people can use their superannuation accounts to invest in various options, in order to save up for retirement.
Jayan
What animal was used in British coal mines until being phased out in 1986?
Canaries
A professional investment manager invested a pool of money from a group of people in a variety of assets. Which investment option is this?
Managed fund
What is cryptocurrency?
a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Cryptocurrency traders operate independently of a central bank.
Inflation is: a) Always exactly 5% per year b) The reason most people get ahead by saving money in a mattress c) The rise in the cost of purchasing everyday goods d) The annual rate of return on a savings account
c) The rise in the cost of purchasing everyday goods
Explain the concept of diversification in relation to investing.
Diversifying your investments means spreading your money across different investment types in order to spread the risk. No single investment will always be the best, but no single investment type will outperform all others over all periods. By spreading your money across a range of different investment types, the risk of a fall in the value of your overall investments can be reduced. A diversified strategy generally provides a greater return.
What are some responsibilities of lenders and advisors when providing financial information and advice?
Correct information, they have to be licensed by ASIC. They need to judge your financial position accurately when lending you money. Offer advice about budgeting, investing, super, retirement planning, estate planning, insurance and taxation.
Which country won the first-ever FIFA World Cup?
Uruguay
What is a debenture?
a document that is issued by a firm when you lend it money. It states the amount, interest and term of the investment. If a firm is liquidated debenture holders are one of the first to be repaid.
What is an unsecured note? Is it more/less risky than a debenture and why?
Similar to a debenture. A document that is issued by a firm when you lend it money. It states the amount, interest, and term of the investment. An unsecured note holder is one of the last to be repaid if a firm is liquidated so it is riskier however it has a higher interest rate.
List the six main investment options:
investment accounts
shares
property
managed funds
superannuation
debentures and unsecured notes.
Cryptocurrency
Outline the role of the Australian Securities and Investments Commission (ASIC).
ASIC is an independent Australian government body that acts as a corporate regulator. ASIC’s role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors. This government agency is important, as its role is to maintain the financial system and monitor investment practices, which directly impacts our nation’s wealth.
Create a hypothetical investment portfolio for Nick: (Justify your choices)
single, 30, high income, high-risk taker, wants a high return to use as a deposit for a house within five years.
choose higher-risk investments:
- shares, unsecured notes, property, higher interest rates investment accounts
What is the largest land animal that can swim, but not jump?
African Elephant