Investments- extra money, additional risk taking, not your own main source of income, and vision of

profit, risk and bankruptcy.

Group of Investments:

Fixed income and equities:

1. Stocks- signify ownership in a corporation.

Advantage: Unlimited Upside

Disadvantage: No guarantee returns

2. Bank Deposits- money placed into a banking institution for safe keeping

Advantage: Known income based on current interest rate

Disadvantage: Settlement risk if the bank closes

Types of Bank Deposits:

Current account (do not earn any interest)

Time Deposit Account (earn the highest interest rate)
Savings Account (earn an interest but not that significant)

3. Bonds (Government)- debts investments where an investors loans money to an entity.

Advantage: Periodic payments for a certain period

Disadvantage: Investors can gain or loss depending on the prevailing

Alternative fixed income and equities

1. Mutual Funds-investments that is made up of pool of funds collected from many investors.

Advantages: Give small investor access to professionally manage bonds

Disadvantages: Pay for the management fee, value can be fluctuated

2. Unit Investment Trust Funds- same to mutual funds but managed by banks.

Advantages: Same as mutual funds. No fees for management.

Disadvantage: No shareholders rights.

Management Fee- amount they pay for the professional who manage their mutual funds.

Dividends- distribution of the company’s income.

Voting rights- right to be on a certain policies.

Other investment assets:

1. Currencies- form of money, including coins and paper notes, which is issued by government.

Advantage: Use to transact

Disadvantage: Volatile and trades 24 hours a day

 2. Commodities- basic goods used in commerce that is interchangeable.

Advantage: Natural hedge against inflation.

Disadvantage: Same as the currencies

3. Real-estate- land and improvement on it.

Advantage: Appreciate over time source of rental income.

Disadvantage: Huge capital needed. Difficult to sell.

4. Insurance- a contract policy, that receive financial protection or reimbursement.

Advantage: Provide tax benefits.

Disadvantage: Insurance premium may be costly. No sickness and death until a certain age may not
getting any benefits.

 Liquidity- ability to be converted into cash.

 Margin- allows the clients to trade more than their capitals.

 Hedge- investment that reduces the risk of adverse price movement of an assets.

 Geopolitical risk- risk of one country’s foreign policy.

 Correlation- how price of an assets moves with respect to another assets.

 Escalation Clause- agreements to raise prices in the future.

 Insurance Premium- amount paid on regular basis to the insurance in return for the
insurance/protection provided.

 VUL- Variable Universal Life Insurance Offers both benefits and investment features.

 Inflation- general increase in prices.

MONEY MANAGEMENT CYCLE

1. Income- refers to cash inflow that individual receives and uses to support themselves.
Source of Income: Salaries, Bonuses, Hourly Wages, Pension, Dividends

2. Spending- includes all types of expenses an individual incurs related to buying goods and services.
Source of Spending: Rent, Mortgage, Taxes, Foods, Entertainment, Travel, Credit Card Payment

3. Savings- excess cash that is retained for future investing or spending.

Forms of Saving: Physical Cash, Saving Bank Account, Checking Bank Account

4. Investing- relate to the purchase of assets that are expected to generate a rate of return.

Form of Investing: Stocks, Bonds, Mutual Funds, Real Estate, Private Company, Commodities

5. Protection: refers to a wide range of products that can be used to guard against unforeseen.

Protection Products- Life Insurance, Health Insurance, Estate Planining