BUSS FINANCE REVIEWER

• To Invest


  To allocate money in the expectation of some benefit in the future
• Return


  The benefit from an Investment in Finance
• Types of Return

  • Gain or loss realized from the sale of a property or an investment
  • Unrealized capital appreciation (or depreciation)
  • Investment incomes such as dividend, interest, rental income
  • A combination of capital gain and income
  • Currency exchange rates
• Investment


  An asset or item acquired with the goal of generating income or appreciation
• Appreciation


  An increase in the value of an asset over time
• Financial investment


  Any asset or instrument purchased with the intention of selling the said asset for a price higher than the purchase price at some future point in time
• Buying and selling products

  • Considered investing
• Equity investment


  Buying stocks from companies and being part of the company's ownership
• Loan investment


  Purchasing loans that will generate income in the future
• Risk-return trade-off


  Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return
• Types of Investments

  • Stocks
  • Bonds
  • Investment funds
  • Bank products
  • Options
  • Annuities
  • Retirement
  • Saving for education
  • Alternative and complex products
  • Initial coin offerings and cryptocurrencies
  • Commodity futures
  • Security futures
  • Insurances
• Categories of Investments


  • Fixed income and equities
  • Alternatives to fixed income and equities
  • Other investment assets
• Fixed income


  Interest payments that an investor receives are based on the solvency of the borrower and current interest rates
• Equity investment


  Buying shares in a particular company and holding it to gain ownership interest that can be sold later to generate reasonable returns
• Alternative investment


  A financial asset that does not fall into one of the conventional equities, income, or cash categories, and tends to be somewhat not easily converted to cash or illiquid
• Mutual funds


  Give small investors access to professionally managed, diversified portfolios of equities, bonds, and other securities, with a management fee required
• Dividends


  Income given to the shareholders from the company
• Unit Investment Trust Funds (UITF)


  Similar to mutual funds but controlled by banks, with no management fee and no shareholder rights for the account owner
• Currencies


  The most generally accepted form of money, including coins and paper notes, issued by a government and circulating within an economy
• Cryptocurrencies


  A form of payment that can be exchanged online for goods and services, using blockchain technology
• Commodities


  The basic goods used in commerce that are interchangeable with other commodities of the same type, such as oil, gold, and base metals
• Real estate investing


  Involves the purchase, ownership, management, rental and/or sale of real estate for profit, including real estate development
• Insurance


  A contract or policy in which an individual or entity receives financial protection or reimbursement against losses from an insurance company
• Insurance premium


  The amount paid by policyholders to the insurance company in return for the insurance/protection provided
• Investments give high opportunities to investors and give them the highest return possible, but can also be used for scams and take advantage of those new to the field
• It is important for every investor to know their goals, priorities, and be willing to face risks, as higher risk can indicate higher returns
• Systematic risk


  The risk inherent to the entire market or market segment, which is largely unpredictable and generally viewed as being difficult to avoid
• Unsystematic risk


  Risks that are not shared with a wider market or industry, often specific to an individual company, and can be reduced by diversifying investments
• Ways to minimize investment risk

  • Determination of tolerance to different kinds of risks
  • Conducting due diligence
  • Diversification of investment portfolio
  • Monitoring of investment
  • Taking advantage of government guaranteed investment products
• Net worth


  Assets minus liabilities, used to determine risk tolerance
• Risk capital


  Money that, if lost on an investment, won't impact the financial position and lifestyle, used to determine risk tolerance
• Due diligence


  Researching the investment instruments before finalizing the investment plan, including checking history, earnings, management, and debt
• P/E ratio


  Measures the relationship between a company's stock price and its annual after-tax earnings, with a significantly higher P/E ratio than comparable companies indicating higher risk
• Diversification of investment portfolio


  A risk management strategy of combining a variety of assets to reduce the overall risk of an investment portfolio, lowering its volatility
• Investment monitoring refers to the ongoing process of tracking and evaluating the performance of an investment portfolio, to protect and grow the investor's capital, maintain optimal asset allocation, manage risk exposure, and ensure regulatory compliance
• Government securities are generally considered a good investment option, especially for risk-averse investors, offering stability, regular income, and liquidity