BUSINESS FINANCE

S.Y. 2022-2023
QUARTER 2

AILEEN F. FLORES
Teacher II
 OBJECTIVES
At the end of the unit lesson, the learners shall be
able to:
1. Identify the types of investments particularly bank
deposits, insurance, real state, mutual funds and stocks
and bonds.
2. Indicate the advantages and disadvantages of each
type of investment.
3. Explain the risk inherent in each type of investment.
Learning Competencies

The learners will be able to:

• Compare and contrast the different
types of investments. (ABM_BF12-IVm-n-23)
• Classify investments according to its
type, features, and advantages and
disadvantages. (ABM_BF12-IVm-n-24)
What is investment?

1. Investment opportunities should

be grabbed only when you have
extra resources
2. Investment should not be your
main source of income.
3. Investments require additional
risk-taking.
Different Types of Investment
1. Fixed income & Equities
The following investment assets can be accessed as follows:

Stocks
• Go to a stock brokerage firm (i.e. COL Financial, AB Capital Securities, etc.) or
a bank with a stock brokerage arm (i.e. BPI Trade, First Metro Securities, etc.)
and open a stock market account by signing the necessary account opening
forms.
• Minimum capital amount, depending on the broker, will be required to be
deposited to successfully open the account (i.e. PHP5,000 for BPI Trade,
PHP10,000 for AB Capital Securities, etc.).
• Most of these stock brokerage firms now provide online access to their
client’s stocks account (i.e. www.colfinancial.com, www.bpitrade.com,
www.abcapitalsecurities.com.ph, etc.).
Bank Deposits
• Go to a bank (BDO, BPI, Metrobank, etc.) and open a
bank account (savings, time deposit, etc.) by signing the
necessary account opening forms.
• Minimum amounts will also be required depending on
which bank and the type of bank deposit they want to
open.
• Some banks also now offer online access to their client’s
bank accounts (i.e. www.bpiexpressonline.com,
www.bdo.com.ph, www.lbpiacces.com, etc.) where they
can monitor their account, pay bills, transfer funds, etc.
via internet.
Bonds
• Same as bank deposits, go to a bank and
sign the necessary bond acquisition forms.
• Minimum purchase of bonds is normally
higher relative to stocks and bank deposits.
• Clients may also view their bond’s
performance online depending from which
bank they bought it from.
2. Alternatives to fixed income and equities
Definitions:

• Management Fee – the amount clients pay

to the professionals who manage their
mutual funds, normally a certain percentage
of portfolio value.
• Dividends – distribution of the company’s
income to its shareholders.
• Voting Rights – right to be heard on certain
policies that the company wants to
implement.
The following investment assets can be accessed as follows:

Mutual funds
• Go to an insurance company or a financial institution that
offers mutual funds (i.e. Philequity, Sunlife, Manulife, etc.) and
sign the necessary account opening forms.
• As with stocks, minimum amounts will be required to
successfully open the account.
• Some of these financial institutions also provide online
access to monitor their mutual fund performance.
Unit Investment Trust Fund
• Same procedures as a mutual fund except that UITF’s are
accessed through banks.
 Definitions:

• Liquidity – ability to be converted into cash, the higher the liquidity the better.
• Margin Trading – allows clients to trade more than their capital. It can magnify both earnings and losses.
• Inflation – general increase in prices.
• Hedge – investment that reduces the risk of adverse price movements in an asset.
• Diversification – process of investing in different kinds of assets to lessen exposure in market/price volatility.
• Geopolitical risks – “risks of one country's foreign policy influencing or upsetting domestic, political, and
social policy in another country or region” (Source: Columbia Threadneedle Blog. (2016). Columbia
Threadneedle Blog. Retrieved 2 May 2016, from http://blog.columbiathreadneedleus.com)
• Correlation – how price of an asset moves with respect to another asset (i.e. positive correlation if both
assets move in the same direction, negative correlation if both assets move in the opposite direction)
• Escalation Clause – agreement to raise prices in the future depending on certain circumstances (i.e. increase
in inflation leading to higher rental rates).
• Insurance Premium – the amount paid on a regular basis to the insurance company in return for the
insurance/protection provided.
• VUL – Variable Universal Life insurance or a life insurance that offers both death benefit and investment
features.
3. Other investment assets
The following investment assets can be accessed as follows:
Currencies and Commodities
• Open a foreign currency/forex account (i.e. oanda, fxcm, cboe, etc.) online.
• Minimum amount required for forex accounts vary and are usually higher
vs. stocks and usually in USD.
•Investments may also be monitored online.
Real Estate
• Contact/visit real estate companies directly (i.e. Ayala Land, Megaworld,
SM Prime, etc.).
• Contact real estate brokers.
Insurance
• Contact/visit insurance companies directly (i.e. Sunlife, Prulife, Manulife,
etc.).
• Contact insurance agents.
Investment Scams characteristics
• Unexpected and unsolicited phone calls, emails,
letters, or personal visits from strangers who are
offering investments
• Above market returns
• Low risk, no risk, or a guarantee
• Giving custody and possession of invested capital
to the investment manager
• Aggregating assets into a pool with other investors
• Investing on the spot
• Special connections, secrets, or inside information
not available to the public
• Invitations to join exclusive investment organizations
• Opportunities for the “next big thing” or a “once in a
lifetime” deal
• Sophisticated terminologies
• Investments offered from overseas
• No prospectus/offering memorandum
• Investments that cannot be verified
• Sold by unlicensed/unregistered people
• Troubles cashing out of the investment
• Salespeople discouraging second opinion
• Salespeople encouraging investing on the basis of trust
• Salespeople asking potential clients to put their life savings
into a single investment
• Salespeople encouraging potential clients to borrow
money for it
• Salespeople requesting for the client’s bank account
details
PRACTICE (30 MINUTES)
Group portfolio management exercise.
1. Form a teams of four to five.
2. There are investment options based on current market prices for
your reference (sample presented below).
3. Allocate a fund of PHP1,000,000 among the different investment
options provided and why.
Sample Investment Options Sheet
Instructions: Allocate your PHP1,000,000 among the following
investment alternatives (in multiples of 10% i.e. 10%, 20%, 30%, etc.).
Allocations
RISK INHERENT TO DIFFERENT TYPES
OF INVESTMENTS
“Risk is the chance that an
investment’s actual return will be
different than expected. Risk includes
the possibility of losing some or all of
the original investment.”
(Source: Investopedia - Sharper Insight. Smarter Investing. | Investopedia. (2016). Investopedia.
Retrieved 8 May 2016, from http:// investopedia.com)
Systematic and Non-Systematic Risk
Diversification
is a risk management technique that
combines a wide variety of
investments within a portfolio to
reduce risk. A well diversified portfolio
can eliminate non-systematic risk.
Sources
(1) Investopedia - Sharper Insight. Smarter Investing.. (2016). Investopedia. Retrieved 2 May 2016, from http://investopedia.com;
(2) Writer Inputs
3) Funds, M. & Tour, A. (2016). Philpad - Your pad on anything Filipino.... Philpad. Retrieved 2 May 2016, from http://philpad.com; (2)
Investopedia - Sharper Insight. Smarter Investing.. (2016). Investopedia. Retrieved 2 May 2016, from http://investopedia.com; (3) Writer Inputs
4) Gateway Financial | Gateway Financial. (2016). Gatewayfinancial.biz. Retrieved 2 May 2016, from
http://gatewayfinancial.biz; (2) Home Guides | SF Gate. (2016). Homeguides.sfgate.com. Retrieved 2
May 2016, from http://homeguides.sfgate.com; (3) Investopedia - Sharper Insight. Smarter Investing..
(2016). Investopedia. Retrieved 2 May 2016, from http://investopedia.com; (4) Saad, Y. & Slachevsky, A.
(2016). From The Markets - eToro Blog. eToro Blog. Retrieved 2 May 2016, from http://etoro.com/blog/
markets; (5) Writer Inputs