L3 Investments

Investments – is any vehicle into which funds can be placed with the expectation that they will
generate positive income and/or their value is preserved or increased.

When one invests, one needs to save first. In other words, you need money or assets to invest.

When you invest, you expect to earn money or profit. one expects to grow money. However, this
is not always the case since there are two possible scenarios, either you lose or earn money

The most important element of investment is TIME. If you don’t want to wait, then, you have to
take the risk.

When investment is too good to be true, it is a scam.

Investment process – this is the mechanism of bringing together suppliers with demanders.
Suppliers are those who held funds while Demanders are people or organizations who needs
money.

IPO (Initial Public Offering) - The process by which a company offers shares of its stock to the
public for the first time, thereby becoming a publicly traded company.

Financial institutions - these are institutions through which savings of individuals, government
and firms channeled into loans and investments. It accepts deposits and utilized the money by
loaning it to individuals. Offers financial assets like mutual funds.

Mutual funds - is used to test the waters in investing. This is a type of professionally managed
collective investment scheme that pools money from many investors to purchase securities
(bonds, stocks).

Classifications of financial market

Money market – This market deals with shorter investments such as treasury bills, commercial
papers, certificates of deposits. The money market provides a platform for the borrowing and
lending of funds for short-term needs.

Capital market – where assets and liabilities or debt securities are traded for long term uses.
These markets channel; the wealth of savers to those who can put it to long-term productive use,
such as companies or governments making long-term investments. In other words, this is for
long term investments.

Participants in the investment process

Government - could be the supplier or demander of funds. The govt. is supplier when they have
idle cash which would lead the govt to invest in business to earn positive returns.

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The govt is considered as DEMANDER when the govt needs money to finance capital
expenditures like long term infrastructure projects and to finance operating cost that keeps it
running. The funds used to finance projects as well as operating expenses are sourced from taxes
and fees collection.

In cases when the operating expenditures exceed government revenues or if govt. receipts are not
yet available to meet govt payments, the govt resorts to borrowing funds by issuing short-term
debt securities or it could either ask international banks for loan.

Businesses- either supplier or demander of funds. If business has idle funds, it is better for firm
to diversify its assets.

The concept of diversification - do not put your eggs (money) in one basket (investment).

Types of share

1. Common share (ordinary share)- Common shareholders have the right to vote at
annual meetings and elect the board of directors, as well as to receive dividends, if any,
that the company declares. Common shares typically have higher potential for capital
appreciation but also higher risk compared to other types of shares.
2. Preferred shares - Preferred shareholders usually do not have voting rights or the ability
to participate in the company's decision-making process. However, in the event of
bankruptcy or liquidation, preferred shareholders have a higher claim on the company's
assets than common shareholders.

Individuals - could be demander/user or supplier of funds. They can loan or lend their money to
other people.

Types of Investment

SECURITIES - Short term investments (maturity is less than one year) - deposit
accounts, commercial paper, promissory notes, certificate of deposits. This has maturity of less
than 1 year, with no risk and easily converted to cash which is popular for conservative investors.

deposit accounts are not considered investments now due to its little returns

certificate of deposits (time deposits) has higher rates compare to saving.

stock shares could be determine as either long term or short term

BONDS are long-term debt instruments that offer a known interest 2. Long term
investments. The maturity is usually 20 years and commonly issued by corporations and
governments

PREFERRED STOCKS represent an ownership interest in a firm, and like common

stocks, has no maturity date. It has a specific dividend rate.

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 CONVERTIBLE SECURITY – can be converted at the option of the holder or issuer.

MUTUAL FUNDS are commonly used name for an investment company which pools
the money of many investors into a large fund. It is managed by a financial professional, called
and investment adviser or fund manager

PROPERTY investment in property can either be in real property or tangible personal

property

REAL ESTATE refers to raw land, buildings and that which is permanently affixed to
the land such as residential homes, commercial property, and the like

TANGIBLES examples of tangibles include gold, precious metals and gemstones, along
with collectible items such as artwork, antiques, coins and stamps. Investors purchase these in
anticipation of price increases (speculation)

SHORT TERM INVESTMENTS has a maturity of one year while LONG TERM
INVESTMENTS have longer maturities, like bonds, or with no maturity at all like common
stocks.

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