Business Finance

• Investing process of buying assets that increase in value over time and provide returns in the form of income
• Investment to allocate money in the expectation of some benefit in the future
• Return may consist of gain or loss. Benefit from an investment
• Appreciation refers to an increase in the value of an asset over time
• Financial Investment is 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
• High Risk is associated with greater probability of High Return
• Low Risk is associated with a greater probability of Small Return
• Risk Return Trade Off an investor faces between risk and return while considering investment decisions
• What are the types of Investment?

  1.) Fixed Income and Equities

  2.) Alternative to Fixed Income and Equities

  3.) Other Investment Assets
• Fixed Income and Equities financial instruments that can help investors achieve their financial goals
• Equity Investments refers to buying shares in a particular company that can be sold later to generate reasonable returns. It generally consist of stocks or stock funds
• Fixed Income refers to the interest payments that an investor receives are based on the solvency of the borrower and current interest rates. It generally consist of corporate or government methods
• Alternative to Fixed Income and Equities financial asset that does not fall into one of the conventional equities, income, or cash categories. It tends to be somewhat not easily converted to cash or illiquid
• Mutual Funds give small investors to access to professionally managed, diversified portfolios of equities, bonds, and other securities, which would be quite difficult to create with a small amount of capital
• Dividends are income given to the shareholders from the company
• Unit Investment Trust Funds (UITF) is somehow the same as with mutual funds aside from it is being controlled by banks
• Currency are the most generally accepted form of money, including coins and paper notes, which is issued by a government and circulate within an economy
• Crypto Currency is a form of payment that can be exchanged online for goods and services. They work using a technology called blockchain
• Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security
• Commodities are the basic goods used in commerce that is interchangeable with their same type
• Real Estate Investing involves the purchase, ownership, management, rental and/or sale of real estate for profit.
• Real Estate Development improvement of realty property as part of a real estate investment strategy
• Real Estate is an asset form with limited liquidity relative to other investments. It’s also Capital Intensive
• Insurance a contract or policy in which an individual or entity receives financial protection or reimbursement against losses from an insurance company
• Insurance Policies are used to hedge against the risk of financial losses
• Insurance Premium paying an amount in regular basis to the insurance company in return for the insurance/protection provided
• What are the Ways to Minimize Investment Risk?

  1.) Determination of tolerance to different kinds of risks

  2.) Conducting due diligence

  3.) Diversification of investment portfolio

  4.) Monitoring of investment

  5.) Taking advantage of government guaranteed investment products
• Determination of tolerance to different kinds of risks every investment involves some level of risks. Understanding the type of risk, or the combination of types of risk, is essential in reducing those risks
• Net Worth is assets minus liabilities
• Risk Capital is money that, if lost on an investment, won’t impact the financial position and lifestyle.
• If there is a high net worth and substantial risk capital, the risk tolerance is higher
• if the net worth is modest or nothing, and the risk capital is not much, it’s probable to be better off with conservative, low risk investment
• Conducting Due Diligence means making research about the investment instruments before finalizing the investment plan
• Buying and Selling is considered to be the most common way of investing
• A company with a significantly higher P/E ratio than other comparable companies in the same industry typically involves a higher risk
• Diversification of Investment Portfolio combining a variety of assets to reduce the overall risk of an investment portfolio. One of its purposes is Portfolio Risk Management.
• Monitoring of Investment refers to the ongoing process of tracking and evaluating the performance of an investment portfolio, ensuring that it remains aligned with an investor’s financial goals and risk tolerance
• Taking Advantage of Government Guaranteed Investment Products are generally considered a good investment option, especially for risk-averse investors. They offer stability, regular income, and liquidity
• What are the Categories of Investment Risk?

  1.) Systematic Risk

  2.) Unsystematic Risk
• Systematic Risk also known as undiversifiable risk, volatility risk, or market risk, affects the overall market, not just a particular stock or industry