MODULE 7

THE NEXT BIG THING

Stocks, Bonds ,Mutual Funds, Amortization &

Mortgage
Stocks, Bonds & Mutual Funds

What is investing?
Investing is purchasing a financial product or other
item of value with an expectation of favorable
returns.

What is the purpose of investing?

The purpose of investing is to save money in order
to improve financial well-being.
Stocks, Bonds & Mutual Funds
What is return on investment (ROI)?
ROI is the rate of revenues received for every
dollar on invested in an item or activity.

ROI rates vary with each

investment.
Stocks, Bonds & Mutual Funds
What are stocks?
Stock is an instrument that signifies ownership in a
corporation and represents claim on a share of a
corporation’s assets and profits.

Stocks are typically riskier and long-term

investments.
Stocks, Bonds & Mutual Funds
What are bonds?
Bonds are interest-bearing certificates used as a
way for government or business to raise money.

The bondholder lends money to the bond issuer

for a set amount of time and interest. When the
bonds are “sold” back to the issuer, the interest
earned is given to the bondholder.

Bonds are typically low-risk and good for short-

term investments.
Stocks, Bonds & Mutual Funds
What are mutual funds?
Mutual funds are open-ended investments that are
professionally managed and consist of a variety of
investment instruments including stocks, bonds,
options, commodities, and money market
securities.

Diversification provides greater safety and reduces

risk.

Mutual funds are long-term investments.

Stocks, Bonds & Mutual Funds
What is real estate?

Real estate is a piece of land and any buildings or

structures on it.

Real estate is a long-term investment.

Stocks, Bonds & Mutual Funds
What are collectibles?

Collectibles are items which have value due to its

rarity and desirability, such as antiques, coins,
cars, and art.

Collectibles are long-term investments.

The 3 C’s of Credit:

Credit - A legal agreement to receive cash,

goods, or services now and pay for them in the
future.

1. Capacity
2. Capital
3. Character
Stocks, Bonds & Mutual Funds
What are precious metals?

Precious metals are natural metals that have

value, such as gold, silver, platinum, and
palladium.

Precious metals are long-term investments.

Stocks, Bonds & Mutual Funds
Do all investments offer a guaranteed positive
return on investment (ROI)?

NO! Although some investments are more likely

to have a positive return on investment.
Stocks, Bonds & Mutual Funds
How are risk and return related?
The greater the risk an investment may lose
money, the greater its potential to provide a
positive substantial return. The inverse is also
true.
Stocks, Bonds & Mutual Funds
What factors determine the degree of risk
investors take?
• Age - investors with more time to invest can
tolerate the market going up and down
• Risk tolerance - comfort level of the investor to
deal with the ups and downs
• Investment goals - what the investor wants to
achieve with the money and when.
Stocks, Bonds & Mutual Funds

Types of investments
• Individual stocks
• Individual bonds
• Mutual funds
• Real estate
• Collectibles
• Precious metals
 Investment Attributes
Identify the attributes (qualities) for different investments. Answer the questions for each type of investment.

Piggy Savings Individual Mutual Individual Real Collect- Precious

Bank Account Bonds Funds Stocks Estate ibles Metals
Do you need a
minimum amount of
money to start/buy
it?

Can you get initial

money back?

Does it pay interest?

Can someone steal

it?

Is it professionally
managed?

Is it easy to access
the money?

Best for Long-Term

or Short-Term
Goals?
 Investment Attributes
Identify the attributes (qualities) for different investments. Answer the questions for each type of investment.

Piggy Savings Individual Mutual Individual Real Collect- Precious

Bank Account Bonds Funds Stocks Estate ibles Metals
Do you need a
minimum amount of
money to start/buy No Maybe Yes Yes Yes Yes No Yes
it?

Can you get initial

money back? Yes Yes Yes Maybe Maybe Maybe Maybe Maybe

Does it pay interest?

No Yes Yes Maybe Maybe No No No
Can someone steal
it?
Yes No No No No No Yes Maybe

Is it professionally
managed? No Yes Yes Yes No No No No

Is it easy to access
the money? Yes Yes No Yes Yes Maybe Maybe Maybe
Best for Long-Term
or Short-Term
Goals? Short Short Short Long Long Long Long Long
Stocks, Bonds & Mutual Funds

Uma will be retiring in five years. She needs a

low-risk place to put her money that will earn
interest. Where might she invest? Why?

Bonds would be a good place for her retirement

monies. They are typically low-risk and still pay
interest.
Stocks, Bonds & Mutual Funds

Skip will be retiring in 38 years. He has an

emergency fund that could support him for
nine months if something were to happen.
Skip wants his money to work for him and he
is not scared of market fluctuations. Where
might he invest? Why?

Stocks and/or mutual funds would be good options.

Typically, stocks and mutual funds perform well over
time and outperform other investments.
Stocks, Bonds & Mutual Funds

Imagene needs to start an emergency fund.

Where might she invest? Why?

A savings account in a bank would be a good option

for her. It is a low-risk investment, easily accessible
and it earns interest.
Stocks, Bonds & Mutual Funds

Anne is saving for a new car. She wants to

buy the car in three years. Where might she
invest? Why?

A savings account in a bank would be a good option

for her. She would earn interest, and it is a low-risk
investment.
Stocks, Bonds & Mutual Funds
There are different types of investments and
all have different ROI.

The greater the risk on an investment, the

greater the possibility of high returns and also
negative returns.

The type of investment should align with your

investment profile.
Amortization Method - method of paying a loan
(principal and interest) on installment basis,
usually of equal amounts at regular intervals

Mortgage - a loan, secured by collateral, that the

borrower is obliged to pay at specified terms.

Collateral - assets used to secure the loan. It may

be a real-estate or other investments.
EXAMPLE 1. If a house is sold for P3,000,000 and the bank requires
20% down payment, find the amount of the mortgage.

Solution:
Down payment= (down payment rate)(cash price)
= 0.20 (3,000,000)
= 600,000

Amount of Loan = (cash price) – (down payment)

= 3,000,000-600,000
= 2,400,000

The mortgage amount is P2,400,000.

Alternate Solution:
Mortgaged amount = % of financed amount x value of the property
= (0.80)(3,000,000) = P 2,400,000