Business Finance
Quarter 4 – Module 1: Week 1 -2
Introduction to investment
Introductory Message
This Self-Learning Module (SLM) is prepared so that you, our dear learners,
can continue your studies and learn while at home. Activities, questions, directions,
exercises, and discussions are carefully stated for you to understand each lesson.
Each SLM is composed of different parts. Each part shall guide you step-by-
step as you discover and understand the lesson prepared for you.
Pre-tests are provided to measure your prior knowledge on lessons in each
SLM. This will tell you if you need to proceed on completing this module or if you
need to ask your facilitator or your teacher’s assistance for better understanding of
the lesson. At the end of each module, you need to answer the post-test to self-check
your learning. Answer keys are provided for each activity and test. We trust that you
will be honest in using these.
In addition to the material in the main text, Notes to the Teacher are also
provided to our facilitators and parents for strategies and reminders on how they
can best help you on your home-based learning.
Please use this module with care. Do not put unnecessary marks on any part
of this SLM. Use a separate sheet of paper in answering the exercises and tests. And
read the instructions carefully before performing each task.
If you have any questions in using this SLM or any difficulty in answering the
tasks in this module, do not hesitate to consult your teacher or facilitator.
Thank you.
What I Need to Know
This module is written and designed to help you understand the definition,
purpose, kinds, advantages, and disadvantages and the risks of investment.
After this module, you are expected to:
1. compare and contrast the different types of investments ABM_BF12-IVm-n-23
a. identify the types of investments particularly bank deposits , insurance, real
estate , hard assets, mutual funds, and stocks and bonds
b. indicate the advantages and disadvantages of each type of investment
What I Know
For almost 40 years, Filipinos are
having a hard time surviving in such
difficult conditions, and more and
more are falling into extreme poverty.
According to the Asian Development
Bank, the major causes of poverty
include: low economic growth, a weak
agricultural sector, increased
population rates and a high volume of
inequality.
Lesson
Introduction to Investment
1
What is INVESTMENT?
- An act of distributing money in the expectation of some benefit in the future. It means
RESOURCES + EFFORT = RETURN.
An investment is essentially an asset that is created with the intention of allowing money to grow. The
wealth created can be used for a variety of objectives such as meeting shortages in income, saving up for
retirement, or fulfilling certain specific obligations such as repayment of loans, payment of tuition fees,
or purchase of other assets.
Investment may generate income for you in two ways. One, if you invest in a saleable asset, you may earn
income by way of profit. Second, if Investment is made in a return generating plan, then you will earn an
income via accumulation of gains. In this sense, ‘what is investment’ can be understood by saying that
investments are all about putting your savings into assets or objects that become worth more than their
initial worth or those that will help produce an income with time. Financially speaking, an investment
means an asset that is obtained with the intention of allowing it to appreciate over time.
Unfortunately, there are investments that will lead to scams or fraud. Below are sample of investment
scams.
Common types of Investment scams
1. High-return or risk-free investments
Some unscrupulous brokers and investment advisors recommend unsuitable products that don’t
meet the investment objectives
2. Pyramid schemes (Ponzi scheme)
Fraudsters promise sky-high returns in a short period of time for doing nothing other than
handing over money and getting others to do the same.
These are a type of illegal pyramid scheme named for Charles Ponzi, who fooled thousands of
New England residents into investing in a postage stamp speculation scheme back in the 1920s.
Today, the Ponzi scheme continues to work on the same “rob-Peter-to-pay-Paul” principle, as
money from new investors is used to pay off earlier investors until the whole scheme collapses.
3. Internet investment fraud
Fraudsters use a variety of Internet tools, including bulletin boards, online newsletters, spam
emails or chat rooms to spread false information.
4. Affinity fraud
This fraud refers to investment scams that prey upon members of certain groups, such as
religious or ethnic communities, the elderly or professional groups.
So the best way to prevent scams, is to have knowledge about the good investment. According to
Warren Buffet, CEO of IBM “ The best investment you can make, is investment in yourself…the more
you’ll learn, the more you ‘ll earn”.
There are various types of good investment, we can categorize it into three types of investment.
1. Fixed income and equities
Fixed income - represent loans that investors extend to corporations or government bodies.
Examples: Bonds
Equity - consists of stocks that are traded on the stock exchanges where the money of a large
number of investors is pooled and spread over a number of different stocks
Examples : Stock
2. Alternatives to fixed income and equities
This kind of investment that is not categorize as fixed or equities but have same traits or
characteristics as fixed income and equities. A good example of this is Mutual funds and Trust funds
3. Other investment assets
This kind of investment is commonly occur because of trade or exchange and sometimes a contract
policy. Example are real estate, currency and insurance.
Now the figure below represent the movement of investment from low risk to high risk investment
http://hsfpp.nefe.org/instructors/channels.cfm?chid=88&tid=1&deptid=22
NEFE Unit 3 Student Guide
Risk vs. Return
• On average, stocks have a high rate of return
– The increase or decrease in the original purchase price of an investment
• Higher rate of return = greater risk
– Uncertainty about the outcome of an investment
• Stocks provide portfolio diversification
– Money invested in a variety of investment tools
How Well the Stock Market is Doing Overall
2 Basic Indicators
1. Analysis of stock index
• Dow Jones Industrial Average (“DOW”)
– Lists the 30 leading industrial blue chip stocks
• Standard and Poor’s 500 Composite Index
– Covers market activity for 500 stocks
– More accurate than DOW because it evaluates a greater variety of stock
• National Association of Security Dealers Automated Quotations (“NASDAQ”)
– Monitors fast moving technology companies
– Speculative stocks, show dramatic ups and downs
2. Ups and Downs
• The term bull market means the market is doing well because investors are optimistic about
the economy and are purchasing stocks
• The term bear market means the market is doing poorly and investors are not purchasing
stocks or selling stocks already owned
What’s In
Creating a Case analysis involving different types of investment.
Instructions:
1. Identify an articles/news that talks about issues in the economy/investment in the Philippines. It
can be online article or on newspaper.
2. Cut/Copy Paste the short article to your case study as the basis of your topic.
3. Create a case study using the template (Make sure you follow the guidelines of the sample
template and questions in the Illustration below)
a. 4. Save your output to a PDF file (for Digital) and Print it to a long coupon with the size 8.5 width and 13
long (for Printed)
