Management Investments

When deciding to invest, individuals and businesses need to take into account any changes in their
personal or economic circumstances.
Personal circumstances
Illness, change in family situations, or losing your job can all
mean that investments need to change. You could have your
funds in a fixed investment earning interest, which you then
need to withdraw in order to pay your bills. Similarly, you might
be making regular payments into an investment, which you
have to cease.
Many people take out income insurance in order to counteract
this. This means that an insurance company will pay you about
80% of your income so you can maintain your financial
obligations.

Economic circumstances
Sometimes the global market changes — things
happen that are out of our control, and it can be
hard to counteract these issues.
Finances of nations around the world change
frequently and may follow patterns based upon
factors such as trade, employment or national
security. Others follow no patterns in times of
turmoil. Knowing you are investing in national
companies that have contingency plans to
counter economic changes means that your
shares might be safer in times of financial
challenge.
Before deciding which shares to purchase, smart investors try to assess the future level of economic
activity, then predict what effect this will have on company profits, and therefore the future value of
share prices. In other words, they base their investment decision on what they think will happen to
certain shares in the future.
Paying attention to the economic cycle is also beneficial in determining what investments to make.
Smart investors will review their investments whenever they realise that the economic cycle is
entering a new phase. For example, during a recession, an investor might invest more of their money
in bonds instead of shares, since bonds are less volatile and thus less risky. Then, when investors
predict the economy is about to recover, they might switch back to shares, which usually have a
higher potential for growth in comparison to bonds.
In small groups, discuss three positive and three negative personal or economic circumstances that may
affect an individual or a business.

Positive circumstances Negative circumstances

Personal 1. 1.
Circumstances 2. 2.
(individual) 3. 3.
Economic 1. 1.
Circumstances 2. 2.
(businesses) 3. 3.

Using the information above and the link below, complete the following questions:
https://www.ampcapital.com/au/en/insights-hub/articles/2018/September/lessons-from-the-GFC

1. Research the 2008 Global Financial Crisis and briefly summarise what it is.
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2. Research how the GFC impacted investors.

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3. Using the website below, summarise the 7 lessons for investors from the GFC.
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