SENIOR HIGH SCHOOL

BUSINESS FINANCE
Quarter 4 – Module 1:
Introduction to Investment

REGION VI – WESTERN VISAYAS

Business Finance – Grade 12
Alternative Delivery Mode
Quarter 4 – Module 1: Introduction to Investment
First Edition, 2021

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Published by the Department of Education

Secretary: Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio

Development Team of the Module

Writer: Louell E. Bodios, Maricris C. Cancino and Mara Ellyn H. Lacson
Editor/Reviewer: Ma. Teresa F. Mijares
Layout Artist: Louell E. Bodios
Division Management Team:
Ma
Marsette D. Sabbaluca, CESO VI
Lynee A. Peňaflor, PhD., ASDS
Ly
Salvacion J. Senayo, OIC-ASDS
Sa
Zaldy H. Reliquias, PhD., Chief-CID
Raulito D. Dinaga, EPS-LRMS
Ra
Ma. Teresa F. Mijares, EPS-Math
Othelo M. Beating, PDO-II-LRMS

Regional Management Team

Ramir B. Uytico, Ed.D, CESO IV, Regional Director
Pedro T. Escabante Jr., PhD, CESO V, Asst. Regional Director
Dr. Elena P. Gonzaga, Regional Chief-CLMD
Donald T. Genine, EPS-LRMS
Rhodalyn G. Delcano-EPS-Math

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 SENIOR HIGH SCHOOL

BUSINESS FINANCE
Quarter 4 – Module 1:
Introduction to Investment
Introductory Message
For the facilitator:

Welcome to the Business Finance Alternative Delivery Mode (ADM) Module on Introduction
to Investment!

This module was collaboratively designed, developed and reviewed by educators both from
public institutions to assist you, the teacher or facilitator in helping the learners meet the
standards set by the K to 12 Curriculum while overcoming their personal, social, and economic
constraints in schooling.

This learning resource hopes to engage the learners into guided and independent learning
activities at their own pace and time. Furthermore, this also aims to help learners acquire the
needed 21st century skills while taking into consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of the module:

Notes to the Teacher

This contains helpful tips or strategies that will
help you in guiding the learners.

As a facilitator, you are expected to orient the learners on how to use this module. You also
need to keep track of the learners' progress while allowing them to manage their own learning.
Furthermore, you are expected to encourage and assist the learners as they do the tasks
included in the module.
For the learner:

Welcome to the Business Finance Alternative Delivery Mode (ADM) Module on Introduction
to Investment!

This module was designed to provide you with fun and meaningful opportunities for guided
and independent learning at your own pace and time. You will be enabled to process the
contents of the learning resource while being an active learner.

This module has the following parts and corresponding icons:

This will give you an idea of the skills or

What I Need to Know
competencies you are expected to learn in the
module.
This part includes an activity that aims to check
What I Know what you already know about the lesson to take. If
you get all the answers correct (100%), you may
decide to skip this module.
This is a brief drill or review to help you link the
What’s In
current lesson with the previous one.

In this portion, the new lesson will be introduced to

What’s New
you in various ways; a story, a song, a poem, a
problem opener, an activity or a situation.
This section provides a brief discussion of the
What Is It
lesson. This aims to help you discover and
understand new concepts and skills.
This comprises activities for independent practice
What’s More to solidify your understanding and skills of the
topic. You may check the answers to the exercises
using the Answer Key at the end of the module.
This includes questions or blank
What I Have Learned
sentence/paragraph to be filled in to process what
you learned from the lesson.
This section provides an activity which will help
What Can I Do
you transfer your new knowledge or skill into real
life situations or concerns.
This is a task which aims to evaluate your level of
Assessment
mastery in achieving the learning competency.

In this portion, another activity will be given to you

Additional Activities
to enrich your knowledge or skill of the lesson
learned.

Answer Key This contains answers to all activities in the

module.
At the end of this module you will also find:

References This is a list of all sources used in developing this

module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the module.
Use a separate sheet of paper in performing the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities included
in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not hesitate to
consult your teacher or facilitator. Always bear in mind that you are not alone.
We hope that through this material, you will experience meaningful learning and gain deep
understanding of the relevant competencies. You can do it!
 What I Need to Know

This module was designed and written with you in mind. It is here to help you the about the
basic concepts of the definition, purpose, kinds, advantages and disadvantages and the risks
of investment. The scope of this module permits it to be used in many different learning
situations. The language used recognizes the diverse vocabulary level of students. The
lessons are arranged to follow the standard sequence of the course. But the order in which
you read them can be changed to correspond with the textbook you are now using.

The module has only one lesson, namely:

• Lesson 1 – Differentiating various types of investments particularly bank deposits,

insurance, real estate, hard assets, mutual funds and stocks and bonds

After going through this module, you are expected to:

1. Compare and contrast the different types of investments. (ABM_BF12-IVm-n-23)

What I Know

Below is a multiple-choice question. Choose the letter of the correct answer. Use a
separate answer sheet for your responses.
1. What is the process of making money grow and have return?
a. Investing
b. Financing
c. Directing
d. Controlling

2. The Largest market in the world in terms of trading volume, so much liquidity is_____.
a. Stock market
b. Money market
c. Currency
d. Bonds

3. What does it mean to be diversified?

a. Having as much money in bonds as you do in stocks
b. Owning investments that react differently to market or economic events
c. Owning at least 20 stocks in whatever industry you think will perform best
d. None of the above
4. What is false diversification?
a. When all your investments move to different rhythms
b. When some of your investments are up while others are down
c. Owning a lot of investments that all move up and down together
d. Having one investment raise higher than the rest

5. What do you get when you buy a share of a mutual fund?

a. A share of all the investments the fund owns
b. An ownership stake in the mutual fund company
c. The right to vote at shareholder meetings for the companies the mutual fund owns
d. Owning a share of stocks

6. If bonds and interest rates were playing together on the playground, they’d be on the:
a. See-saw
b. Slide
c. Swing
d. Monkey bars

7. Which is true of money market mutual funds?

a. Enable individuals and small business to invest indirectly in money market instruments
b. Are available only to high-worth individual
c. Are involved in acquiring and placing mortgages
d. Are also known as finance companies

8. Of the following four investments, which is considered the safest?

a. Commercial paper
b. Corporate bonds
c. Treasury bonds
d. Treasury bills

9. Which of the investments gives the insured individual/entity the cash/capital to deal with
unforeseen adverse financial consequences?
a. Bonds
b. Banks
c. Real estate
d. Insurance

10. Which is not a fixed income and equity insurance?

a. UITF
b. Bank Deposit
c. Bond
d. Stocks
 What’s In

Read and answer the following:

Mr. Santos just received his retirement incentives amounting to P1,000,000.00. He is planning
to buy a small farm land so that he can have a simple life of plant bearing trees and vegetables.
However, there is an offer from his friend who wanted to borrow his money for a 10% interest
per year for 5 years.
Guide questions:
1. What will be the risk and return trade-off to be faced by Mr. Santos in making decision?
2. If you were Mr. Santos, what will you choose? A small farm or a 10% interest per year
for 5 years?

Lesson
Differentiating Various Types of
1 Investments

This module will help you learn how to compare and contrast various types of investments. It
aims to understand and apply concepts on bank deposits, insurance, real estate, hard assets,
mutual funds and stocks and bonds. So, ready your working space to make this lesson more
meaningful. Let us begin!

What’s New

Analyze and answer the following questions. Use a separate answer sheet for your answers.
Questions:
1. Describe your savings (i.e. PHP10,000) could have grown under different types of
investments.
2. Describe how money loses value in buying material things such as toys, gadgets, etc.
3. Which would they prefer, those which grow their money or those which lose value?

What Is It
?

What is an investment?
Is hiding money in a mattress or keeping it in a piggy bank an investment? No! The “safe-
keeping” of money does not involve any expected compensation.
How about baseball cards or Beanie Babies? Are they an investment? Possibly, but
compensation is highly uncertain, and some of the value of ownership may be “sentimental”
rather than financial in nature
An investment is the current commitment of resources for a period of time in the expectation
of receiving future resources greater than the current outlay.
Investing is a process of making money grow and have return. But in every type of investment,
each has its own level of risk and return. The higher the potential return on top of the
investment, the higher the risk or uncertainties that even the investment aside from the
promised return will not be recovered.
In order to minimize the risk, a mix of different investment types is being done to spread risk
and get the targeted results. It is also important to do some research where to put the
investment or ask an investment consultant for whatever advice to understand the risk and
other matters about investments.
Advantage and Disadvantage of Investing

Advantages
• Investing is the process of letting the
money work instead of working hard
for the money.
• It is advisable for an individual to
work in a job all their life and then rely
on pension after retirement.
Disadvantages
• The possibility of losing money on
whatever investment opportunities.
Stock prices fluctuate the prices of
real estate which is traditionally the
most secure investment are not a
guaranteed return unless there are
takers or buyers.
The different types of investments will be grouped into three:
1. Fixed income and equities,
2. Alternatives to fixed income and equities,
3. Other investment assets

Fixed Income and Equities

Investment Type Advantages Disadvantages

Stocks (Equity) “Type of
security that signifies
ownership in a corporation
and represents a claim on
part of the corporation's
assets and earnings”
Bank Deposits (Fixed
Income)
“Money placed into a
banking institution for
safekeeping”
Bonds (Fixed income)
“Debt investments where an
investor loans money to an
entity which borrows the
funds for a defined period of
time at a variable or
commonly, fixed interest
rate”
• No guaranteed returns.
• Riskiest of all assets (can
• Unlimited Upside
lose even more than 50% of
their money in one day)
• Known income based on
• Lower interest income vs.
outstanding principal and
bonds
current interest rate •
• Settlement risk if the bank
Shorter, if any, holding
closes
period vs. bonds
• If not held until maturity
and pre-terminated, investor
can gain or lose depending
• Known periodic payments
on the prevailing interest
for a certain period of time
rates at the time of pre-
• Can’t lose money if bond
termination. If interest rates
investment is held until
are higher, investor in bonds
maturity
can lose in the pre-
termination

Alternatives to fixed income and equities

Investment Type Advantages Disadvantages

“Give small investors access
Mutual funds
to professionally managed,
“An investment that is made
diversified portfolios of
up of a pool of funds • Pay management fees
equities, bonds and other
collected from many • Values can also fluctuate
securities, which would be
investors for the purpose of just like the stock market
quite difficult (if not
investing in stocks, bonds,
impossible) to create with a
and similar assets”
small amount of capital”
• Same as mutual funds.
• Easier access because
Unit investment trust fund No shareholder rights for
clients can open an account
(UITF) investors such as dividends
in any branch of the bank
Similar to a mutual fund but and voting rights
near them.
is managed by banks
• No entry and management
fees

• 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.
Other investment assets
Investment Type
Currencies
“Generally accepted form of
money, including coins and
paper notes, which is issued
by a government and
circulated within an
economy” (i.e. USD, EUR,
JPY)
Commodities
“A basic good used in
commerce that is
interchangeable with other
commodities of the same
type” (i.e. gold, nickel, oil)
Real Estate
“Land and any
improvements on it” (i.e.
land, house and lot,
condominiums)
Insurance
“A contract (policy) in which
an individual or entity
receives financial protection
or reimbursement against
losses from an insurance
company” (i.e. life
insurance, educational
plans, VUL)
Advantages
• Largest market in the
world in terms of trading
volume, so much liquidity
• Unlike stocks,
commodities, etc., currency
asset itself is a medium of
exchange which people can
use to transact
• Natural hedge against
inflation
• Negatively correlated with
equities and bonds (may be
used for diversification)
• Hedge against geopolitical
risks
• Generally appreciates over
time because land gets
scarce • Have relatively low
correlations with other asset
classes (may be used for
diversification)
• Can be a source of
recurring rental income
• May also be a hedge
against inflation because of
inflation-linked rent
escalation clauses
• Gives the insured
individual/entity the
cash/capital to deal with
unforeseen adverse
financial consequences
• May provide certain tax
benefits (i.e. tax
deductibility, tax-free
provisions)
Disadvantages
• Volatile and trades 24-
hours a day (must be
closely monitored)
• Generally uses margin
trading which allows clients
to bet more than their capital
(may also be an advantage)
• Same as currencies
• Impractical to invest
directly considering storage,
transportation and insurance
costs involved
• Huge capital needed,
financing can be difficult
• Maintenance of the
property needed to preserve
its value
• Illiquid or difficult to sell
• Insurance premiums may
be costly
• On some of traditional
insurance plans, no
sickness/death until a
certain age may mean not
getting any benefits at all
(that’s why VUL’s are now
very prevalent)
• Some insurance
companies can go bankrupt
(i.e. College Assurance
Plan) if companies fail to
factor significantly adverse
unforeseen circumstances
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”
• 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.

What’s More

In recording your responses, use a separate answer sheet.

A. Matching Type: Match the investment asset in column A with its description in column B.
Write letters only.

(A) Investment Asset (B) Description

_____ 1. Stocks (Equity) A. An investment that is made up of a pool of

funds collected from many investors for the
purpose of investing in stocks, bonds, and similar
assets.
_____ 2. Bank Deposits (Fixed Income) B. Land and any improvements on it.
_____ 3. Mutual Funds C. A Type of security that signifies ownership in
a corporation and represents a claim on a part of
the corporation’s assets and earnings
_____ 4. Real Estate D. A contract (policy) in which an individual or
entity receives financial protection or
reimbursement against losses from insurance
company
_____ 5. Insurance E. Money place into a banking institution for
safekeeping
B. Match the investment asset in column A with its advantage/disadvantage in column B. Write
letters only.

(A) Investment Asset (B) Advantage/Disadvantage

_____ 6. Stocks (Equity) On some of traditional plans, no sickness/death

until a certain age may mean not getting any
benefits at all
_____ 7. Bank Deposits (Fixed Income) B. Advantage: Shorter, if any, holding period vs.
bonds
_____ 8. Mutual Funds C. Advantage: Can be a source of recurring
rental income
_____ 9. Real Estate D. Disadvantage: Riskiest of all assets (can lose
as much as 50% of their money in one day)
_____ 10. Insurance E. Disadvantage: Pay management fees

What I Have Learned

Investing is a process of making money grow and have return. But in every type of investment,
each has its own level of risk and return. The higher the potential return on top of the
investment, the higher the risk or uncertainties that even the investment aside from the
promised return will not be recovered.
Fixed Income and Equities

Investment Type Definitions

Type of security that signifies ownership in a corporation
Stocks (Equity) and represents a claim on part of the corporation's assets
and earnings
Bank Deposits (Fixed
Income) “Money placed into a banking institution for safekeeping”

“Debt investments where an investor loans money to an

Bonds (Fixed income)
entity which borrows the funds for a defined period of time
at a variable or commonly, fixed interest rate”

Alternatives to fixed income and equities

Investment Type Definitions

An investment that is made up of a pool of funds collected
Mutual funds
from many investors for the purpose of investing in stocks,
bonds, and similar assets.
Unit investment trust fund
(UITF) Similar to a mutual fund but is managed by banks
Other investment assets

Investment Type Definitions

Generally accepted form of money, including coins and
Currencies
paper notes, which is issued by a government and
circulated within an economy” (i.e. USD, EUR, JPY)
A basic good used in commerce that is interchangeable
Commodities with other commodities of the same type” (i.e. gold, nickel,
oil)

Land and any improvements on it” (i.e. land, house and lot,
Real Estate
condominiums)

A contract (policy) in which an individual or entity receives

Insurance financial protection or reimbursement against losses from
an insurance company” (i.e. life insurance, educational
plans, VUL)

What Can I Do

Read and answer the questions below. Use a separate answer sheet.

1. Why would a risk-taker (likes to take risks) type of investor prefers equities over fixed
income?
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

2. Why would a risk-averse (likes to avoid risks) type of investor prefer fixed income
over equities?
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

3. How do mutual funds differ from UITFs?

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
 Assessment

Differentiate the different types of investments. Choose only two investment in each category
to compare and contrast. Use the Venn diagram to illustrate your answer.

Differences

Similarities

Differences Differences

Additional Activities

Read and answer.

1. Let’s say you have PHP1,000,000 today, in which you can invest for the next 10 years,
where will you put it and why?

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
 What’s New
1. Based on the table the highest % of return of ten thousand in 12 years period is stocks
while the lowest % of return is through bank deposits.
2. money losses its value through the years if invested in things or other fixed assets due
3. How do mutual funds differ from UITFs?
to depreciation.
equities?
3. I prefer to invest my money to bank, insurance or stocks rather than on gadgets for a
2. Why would a risk-averse (likes to avoid risks) type of investor prefer fixed income over
higher return in due time.
income?
1. Why would a risk-taker (likes to take risks) type of investor prefers equities over fixed
Answers may vary.
What’s In What I Know
1. The risk trade off to be faced by Mr. Santos is whether
1. A
invest his retirement incentive worth 1,000,00 to a farm or
to lend it at 10% interest per year for five years 2. C
3. B
2. If I were Mr. Santos I’d rather invest it in a small farm 4. C
although it would not have an immediate return but it will 5. B
return it three folds or even more in due time. Higher 6. B
risk=higher returns. 7. A
8. B
9. D
Answers may vary. 10. A
Answer Key
Publishing, Inc.
Business Finance for Senior High School, De Guzman, A.A., (2019), Lorimar •
Commission on Higher Education, 2016 ©, Chairperson: P.B. Licuanan, Ph. D.
Teaching Guide for Senior High School BUSINESS FINANCE – Published by •
Book References:
References
What Can I Do
1. Equities are the riskiest of all assets because of their price volatility. In the Philippine
Stocks Exchange, clients can lose as much as 50% on a stock in one day. Reasons why
stock prices are volatile include uncertainties in company’s earnings, negative or positive
market sentiment of investors, etc. And with these great risks comes the potential for great
upside for the risk-taker investor.
2. Fixed income assets are low-risk investments. Even if potential returns are low relative
to equities, it gives the risk averse investor known income/periodic payments. Note
however that this is only true if the security is held until maturity. Default risk, which is the
risk of the counterparty not fulfilling his obligation is also present in fixed income assets.
Therefore, an investor must carefully analyze the issuer and must be convinced about its
financial stability before buying its debt security.
3. Mutual funds are offered by non-bank institutions while UITFs are offered by banks.
Given that UITFs are offered by banks, they are more accessible than mutual funds. Mutual
funds on the other hand require management fees but provide the investors with
shareholder rights such as dividends and voting rights. Since the underlying asset of
mutual funds can also be equity, returns are not guaranteed and an investor can also lose.
What’s More
1. C
2. E
3. A
4. B
5. D
6. D
7. B
8. E
9. C
10. A
Additional Activities
Note :They can put it in one investment instrument or it can be a portfolio. Whatever the
answer is, there has to be an explanation.
Assessment
WHAT’S MORE:
WHAT I CAN DO
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