Topic 6 - Investing

OPTION
6 Investing
6.1 Overview
Numerous videos and interactivities are available just where you need them, at the point of learning, in
your digital formats, learnON and eBookPLUS at www.jacplus.com.au.
6.1.1 Introduction
When people have savings or extra money, they can make decisions to try and turn it into something more.
This is called investing. There are many ways that people invest, with their choices providing large or small
returns, depending on the risk. Being informed about the options and their risks, being realistic about what
they can afford, and taking time to plan and keep accurate records will help them make good investment
choices. This topic will focus on the decisions and planning involved when making sound investments in
today’s financial environments.
CONTENT FOCUS
On completion of this topic, you will have:
• explored the range of investment options available and analysed information and data to make informed
investment decisions
• examined the role and responsibilities of the financial services industry.
358 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5
Resources
Video eLesson Investing (eles-3511)
Digital documents Key terms glossary (doc-32669)
Worksheet 6.1 Start up! (doc-32711)
eWorkbook Customisable worksheets for this topic (ewbk-0863)
6.2 Reasons for investing

6.2.1 Reasons individuals and businesses invest
Investment is when money is spent in order to gain a profitable return. Businesses and individuals may
invest, for a variety of reasons:
• Businesses may invest in new machinery, technologies, factories, product initiatives, people
(entrepreneurs), other firms or their own workforces (through programs to increase the workers’
skills and efficiency levels). Companies do this to increase their profit levels.
• Individuals invest their savings in order to achieve some future goal. These goals may be short term
(1–3 years), medium term (4–6 years) or long term (over 7 years). Examples of goals that might lead
individuals to look for investment opportunities include the desire for extra income and future security,
to pay for a major purchase, to fund a holiday or a child’s education, or to ensure a comfortable
retirement. Individuals also invest in their own education. This may mean that their goals are achieved
faster through a higher paying job.
COMFACT
Governments also invest, in areas such as education, roads, railways, justice systems and defence forces. This
type of investment does not directly create a profit. Its purpose is to ensure that a country is competitive against
all other nations throughout the world. It also helps to build a more prosperous nation with an increasing standard
of living.
CASE STUDY
Decisions, decisions! managed
fund
Nadia looked at the bank statement in front of her in disbelief.
shares
She was $1000 in debt. How could this be? After all, she earned
a fortnightly salary of $1800 and she still lived at home with her
debentures
parents. It was definitely time to get her act together and work unsecured superannuation
out a savings plan. Nadia felt exhilarated by the idea, and was notes
determined not only to repay what she owed, but also to become cryptocurrency
one of those responsible people who invest for the future!
bank
She made a careful budget and, by cutting back on her
expenses, she managed to have a positive bank balance within
a month. Nadia realised that if she continued to spend her money
wisely, she could make some serious savings. However, as she
thought about it, it didn’t seem wise to just leave the money in the
bank. Although an online savings account would give her 4 per
cent interest, she was certain that there were better opportunities
to be gained.
Nadia’s best friend Liza advised her to buy shares on the
internet using an internet broker as this would be cheaper than
using a stockbroker. The prospect of making lots of money was
exciting, but Nadia thought it was all just a bit too confusing and it
seemed to be a high-risk option. After all, what did she know
TOPIC 6 Investing 359

about the Australian stock exchange? Additionally, Nadia had seen something on the news called
cryptocurrency but she had no idea if this was a fad or how it worked. A work colleague suggested that she
should consider investing in a managed fund because it was a better option for first-time investors, but Nadia
was still in two minds.
She loved living with her parents, but perhaps it was time to leave the nest. She had read that property
could provide a very lucrative investment. Her mother, on the other hand, had stressed the importance of
superannuation because she claimed that you can never have too much money stacked away for your
retirement.
And, just to make things even more confusing, the Sunday paper had a long article outlining the difference
between something called debentures and unsecured notes. Apparently, the first was better because if the firm to
which you lent money went into liquidation, your investment was still safe as you would be first creditor in line to
be repaid.
‘This is just too confusing! There are too many choices. I give up!’ Nadia exclaimed in frustration. She had to
take the next big step and ask for some professional help. With a sigh she picked up the phone.
‘Best Practice Financial Planning Service. How may I help you?’, a cheerful and confident voice greeted Nadia.
CASE STUDY
Terry’s retirement plans
Terry worked as a panel beater for a smash repair
company. When he was 18, he began to pay into his
superannuation fund.
As Terry grew older his circumstances changed.
There was a wedding, children, holidays, education and
retirement plans that all had to be paid for. However, while
Terry changed the amount he put into superannuation,
he always paid as much as he felt he could afford as he
wanted to secure his future once he retired.
Terry is now 60 and intends to retire when he is 65. When
he retires, he expects to receive a lump sum of over one
million dollars. After seeking advice from a financial adviser,
Terry intends to invest this money in a combination of
shares and high-interest bank deposits. With the dividends
and interest he receives from this, he expects to be able
to maintain his current lifestyle and have enough to pay for
a holiday each year. As he enters old age, he and his wife
will sell their large 4-bedroom home and buy a smaller unit.
The money left over from this will ensure their continued
happiness.
Resources
Digital document Worksheet 6.2 Investing (doc-32844)
6.2 Activity: Research and communication

Interview a parent, other relative or family friend about their short-term, medium-term and long-term financial
goals and the types of decisions they made to try to achieve them.
6.2 Exercise: Knowledge and understanding
To answer questions online and to receive immediate feedback and sample responses for every question go to
your learnON title at www.jacplus.com.au.
1. Copy the passage below and fill in the missing words from the information in this subtopic.
__________ is when money is spent so as to gain a __________ return. Individuals, __________ and
__________ generally carry out investment.
Businesses may invest in new __________, ____________, factories, _______ initiatives, people
(entrepreneurs) other __________ or their own __________.
__________ may invest in areas such as __________, roads, __________, justice systems and __________
forces.
Individuals invest their __________ in order to achieve some future goal such as a holiday.
2. Refer to the case study ‘Decisions, decisions!’.
(a) List all the types of investments about which Nadia was given advice.
(b) Describe how Nadia managed to change her $1000 debt into a positive bank balance.
(c) Explain why Nadia was confused.
(d) Which financial planning firm did Nadia contact? What do you think the benefits would be from
contacting this firm?
3. Refer to the case study on Terry’s retirement plans.
(a) How did Terry’s circumstances change as he grew older?
(b) Where does Terry intend to invest his retirement money?
(c) Describe how Terry intends to obtain more money once he retires.
4. Write out your own financial goals for the:
(a) short term (1–3 years)
(b) medium term (4–6 years)
(c) long term (over 7 years).
Estimate the funds that you might need to achieve your goals.
Fully worked solutions and sample responses are available in your digital formats.
6.3 Financing your investment

You can finance an investment in two main ways: through personal savings or by borrowing. Most people
save for smaller investments and borrow money by taking out a bank loan for larger investments. People
who wish to begin investing should first assess their current financial position to avoid over-committing
funds that they cannot afford.
6.3.1 Saving for an investment

The advantage of saving before you invest is that you do not have to pay interest on a loan. However, it
takes time to save sufficient funds to make the investment. This may mean you have extra costs, such as
paying rent while saving for a house.
Before starting to save, it is important to work out how much you are spending and whether there are
ways to spend less and save more. Some steps to begin this process include:
• writing out a set of financial goals
• preparing a weekly budget of likely spending
• keeping a record each week of income and expenditure and comparing it to your budget.
Any surplus funds should be transferred to an investment account that earns higher interest than a regular
bank account.

6.3.2 Borrowing to invest
When borrowing money for an investment, you must first ensure that you can afford the repayments. Shop
around for some loans that suit your purposes and carefully check and compare the features of these loans.
For example, personal loans may be secured (the bank or financial institution retains an interest in the item
purchased, such as a boat or car) or unsecured; and home loans involve a choice of either a fixed interest
rate or a variable rate.
A fixed interest rate remains the same for the period of the loan. Fixed interest rate loans give you
greater control over your finances because the repayment amount remains the same for the fixed interest
period. However, fixed interest loans cannot usually be paid off before the set date without having to pay a
penalty fee.
A variable interest rate moves up or down depending on the financial market. With a variable rate, you
are, therefore, at the mercy of the market. Interest rates will vary considerably over time. The Reserve bank
of Australia has some control in setting interest rates.
6.3.3 Income and expenditure account

To determine exactly how much an individual or business has to invest, it is a good idea to prepare a weekly
income and expenditure account. This is a continuous record of income earned and money spent during
the previous week.
A typical income and expenditure account
Income and expenditure account of Khanh Nguyen
Date Income Amount Date Expense Amount
1 Jul Balance available to invest $30.00 1 Jul Rent $60.00
1 Jul Pay for casual work $200.00 2 Jul Magazine $8.00
3 Jul Medicare refund $17.00 4 Jul Groceries $27.00
6 Jul Interest on deposit $47.00 5 Jul Donated to Red Cross $5.00
Total income $294.00 7 Jul Mobile phone $20.00
.... .................... ...... Total expenses $120.00
7 Jul Balance available to invest $174.00
.... ................... .....
8 Jul Pay for casual work $208.00 9 Jul Groceries $29.00
12 Jul Medicare refund $20.00 11 Jul Doctor’s bill $18.00
14 Jul Birthday gift $50.00 11 Jul New fishing rod $50.00
Total income $452.00 12 Jul Internet $18.00
13 Jul Entertainment $36.00
14 Jul Petrol for car $23.00
Total expenses $234.00
Balance available to invest $218.00 14 Jul Balance available to invest $218.00
The income and expenditure account of Khanh
Nguyen gives the following information.
1. At the start of the week, Khanh had $30 left over
from the previous week. This is listed as the
balance at 1 July at the start of the income column.
All income is then listed and totalled. In the first
week, this is $294.00.
2. Expenses are listed in the right-hand column and
then totalled. In this case, total expenses were
$120.00.
3. To calculate the amount that Khanh has available
to invest at the end of the week, the total expenses
are deducted from her total income. This is then written as ‘Balance available to invest’ and is $174.00.
4. Khanh now transfers this amount from 7 July in the right-hand column to the start of the next week on
the 8 July as her new balance. She again adds her income and deducts her expenses to gain the balance
of $218.00 for the week ending 14 July.
5. The process continues and Khanh can see exactly where her money has come from and where it has
gone. She is also able to determine exactly how much she has available to invest.
6.3.4 Superannuation as an investment form

Superannuation is a form of compulsory investment that is funded by your employer, who pays a percentage
of your wage into a type of savings account. It is almost as if you are investing in your own retirement,
locking away funds for when you are no longer working. Some people just pay the minimum compulsory
percentage of about 9.5%, while others may choose to invest extra income into their superannuation
account. You can also invest your superannuation in order to have it make more money for you.
You can find out more about superannuation later in this topic.
Resources
Weblink Banks and institutions

1. With a partner, create and practise a 30-second elevator pitch on the benefits of keeping an income and
expenditure account.
2. If you borrowed $1000, would you choose a variable or fixed interest rate? Do some internet research on
variable interest rates and fixed interest rates, then create a pros/cons list for both options and make your
choice. Write three sentences justifying your decision.

1. Name the two most common ways of financing an investment.
2. Describe the main advantages and disadvantages of saving to invest.
3. Outline the difference between a fixed interest rate and a variable one.
4. Refer to Khanh Nguyen’s income and expenditure account.
(a) How much did Khanh have available to invest at the start and at the end of each week?
(b) Did Khanh have greater expenses in the first or second week?
(c) What was Khanh’s largest expense?

5. Copy the income and expenditure account for Jamie Chang (below) either into your notebook or a
spreadsheet program. Fill in the places where there are question marks.
Date Income Amount Date Expense Amount

15 Jul Pay day $180.00 15 Jul Newspaper bill $11.00
17 Jul Bank interest $110.00 16 Jul Meat $45.00
21 Jul Mowing lawns $45.00 16 Jul Refreshments $55.00
Total income $? 18 Jul Sport fees $2.00
19 Jul New car muffler $87.00
19 Jul Raffle tickets $5.00
20 Jul Petrol for lawn mower $2.00
21 Jul Total expenditure $?
Balance available to $?
invest
6. Prepare the income and expenditure account for Leo Lansky using the information below. If possible, use a
spreadsheet program to do this.
Date Item Amount

1 Jul Balance available to invest $20.00
1 Jul Pay day — received $210.00
2 Jul Paid rent $80.00
3 Jul Purchased groceries $40.00
4 Jul Purchased meat $20.00
5 Jul Received bank interest of $12.00
6 Jul Entertainment costs $40.00
7 Jul Total and calculate the balance of the week’s accounts $?

8 Jul Bring the previous week’s balance forward $?
8 Jul Pay day — received $210.00

9 Jul Paid rent $80.00
10 Jul Purchased groceries $30.00
12 Jul Purchased meat $25.00
12 Jul Received money for lawn mowing $25.00
12 Jul Paid sport fees $10.00
12 Jul Entertainment costs $35.00
14 Jul Total and calculate the balance of the week’s accounts $?
7. Use the Banks and Institutions weblinks in the Resources tab to help you prepare a PowerPoint
presentation that compares the different interest rates of the main banks, credit unions and building
societies.
6.4 Range of investment options
People can invest in many ways. Some options available to investors include investment accounts, shares,
property, managed funds, superannuation, debentures and unsecured notes, and cryptocurrency.
6.4.1 Investment accounts

All banks, building societies and credit unions
offer a variety of investment-type accounts. These
include cash management accounts, internet Investment
accounts and term deposits. accounts
A cash management account is similar to a

normal statement savings account in that funds
can be withdrawn and deposited whenever you Cryptocurrency Property
like. The differences are that it will pay a much
higher rate of interest and there is usually a
substantial minimum amount that must be kept Investment
in the account; for example, $5000. Internet options
accounts can be accessed only through the
internet. They offer higher rates of interest, Debenture
few statements and lower fees. They tend to and Managed
unsecured funds
make excellent investment accounts, but have notes
limitations as an everyday access account.
A term deposit is a sum of money deposited
with a financial institution that must be left there Superannuation
for a set period of time (the term) in order to

receive higher rates of interest in return. You
cannot withdraw or add to the deposit if you wish
to retain the higher interest rates. Most term deposits give you the choice of when the interest is paid, either
monthly or when the term expires (this is called ‘at maturity’). Term deposits are for people who wish their
money to be very safe and who are also seeking a reasonable level of return.
6.4.2 Shares
Buying shares means buying a certain number of units of
The electronic display board of the Australian
ownership in a company. This makes you a shareholder Securities Exchange shows the prices of
of that company. Some people might buy thousands of shares traded at the exchange.
shares, others only a few. As the value of a company’s
shares goes up or down, so too does the value of the
shareholder’s investment. Owning shares allows you to
benefit from the company’s profits, which can be given to
you as dividends or as extra shares. You may also benefit
from capital growth if the value of your shares increase.
Buying and selling shares takes place in the
sharemarket. In Australia, such transactions take place
through the Australian Securities Exchange (ASX), which
was formed in 1987 by amalgamating the six capital-city
stock exchanges. A stockbroker has direct access to the
market for trading shares and, for a small fee, acts as an
agent who buys and sells shares for others. The fee is known as brokerage. You can also buy and sell shares
online, and there are a number of online stock trading sites that can help you with your investment choices.

It is important to diversify your
Thousands of shares are traded every day on the Australian
investments so that all your ‘eggs’ are not Securities Exchange (ASX).
in one basket if anything goes wrong. The
Australian sharemarket makes this easier by
offering a wide choice of companies in which
to invest. There are over 2000 companies
listed on the ASX. These companies are
involved in a wide range of industries
covering most sectors of the economy, from
financial services to manufacturing and
healthcare. Investing in a range of companies
spreads the risk. Investing in shares also
gives you flexibility. Shares can be bought
and sold quickly — you can sell shares and
generally have access to your money in three
days or less.
6.4.3 Property
In most cases, investing in property involves
The largest investment most people will ever make is buying
people purchasing their own home or their own home.
apartment. This tends to be the largest
individual purchase a person will make.
In Australia, purchasing your own
property has advantages, such as no longer
having to pay rent, and when your property is
sold, any profits from its increase in value are
not taxed.
Apart from owning a home to live in,
many people purchase an investment
property with the intention of renting it
out. This provides advantages including the
income from the rent, the probability of the
property increasing in value (appreciating)
and taxation benefits.
6.4.4 Managed funds
A managed fund is made up of a pool of money that comes from many people who have similar investment
goals. A professional fund manager invests this money in assets such as shares or property. A managed
fund allows a small investor to be involved in the share market and real estate.
COMFACT
Warren Buffett is the world’s richest investor. His wealth is estimated at US$81.3 billion. This makes him the
world’s third richest person. Since 1965 his firm, Berkshire Hathaway, has had an average return of 19 per cent.
Despite his wealth, Warren is generous person, having donated over US$27 billion to charity in the last 10 years.
6.4.5 Superannuation
A superannuation fund is a compulsory savings account where each time you are paid over a certain
amount, your employer will allocate a percentage of your income to the account. You may also want to pay
additional money into your account, because this does have some tax advantages.
6.4.6 Debentures and unsecured notes
A debenture is a long-term loan issued by a
Sample interest rates for debentures and unsecured
company to raise money. This loan is paid back over notes
a long period of time and at a fixed rate of interest.
Term Debentures Unsecured notes
As an alternative to investing in shares, you can
invest in a company by buying a debenture — that 6 months 5.00% 6.00%
is, by loaning the company money. The debenture 1 year 7.85% 8.50%
states the amount lent, the interest the company 2 years 8.45% 8.95%
will pay and the period, or length of time, of the 3 years 8.65% 9.50%
investment. This is more secure than investing in 4 years 9.00% 10.25%
shares, because interest payments must be made by
5 years 9.75% 11.25%
the company. They will also include a security that
will guarantee the investment even if the company defaults.
Unsecured notes are similar to debentures except that they are not secured against the business’s assets,
and therefore present a greater risk to the investors in the note (the lender). For this reason, an unsecured
note attracts a higher rate of interest than a debenture.
6.4.7 Cryptocurrency
Cryptocurrencies are digital-based finances, traded mostly
Electronic display board showing the
within the virtual world. Cryptocurrencies were created as an price of some cryptocurrencies
alternative to typical currencies, which are controlled by banks,
governments and other financial institutions.
Bitcoin is one of the earliest and most well known
cryptocurrencies, and is seen to be a desirable investment due
to the capped (limited) production available to consumers. This
means the value of each bitcoin stays high with more unable to
be circulated. Cryptocurrencies are a very high-risk investment.
Resources
Digital document Worksheet 6.3 Investment options (doc-32845)
Weblinks The Sydney Morning Herald
The Daily Telegraph

1. Access reliable online news sources and find three newspaper articles on cryptocurrency. Complete the
following table.
Opinion presented of
Article Article Date of Summary cryptocurrency (good or
heading author article of article bad investment) and why
2. Property prices rise and fall at various times. These changes mean people’s ability to buy their own home
also fluctuates. In small groups, or independently, determine whether or not you think that people should
invest in property to build up their savings.

1. List the main options available for investors.
2. Describe the features of an internet bank account.
3. Describe the advantages of owning your own home.
4. Explain the advantages of a managed fund for a small investor.
5. What is superannuation?
6. Distinguish between a debenture and an unsecured note.
7. Refer to the table below which shows a summary of a day’s trading on the ASX for the selected companies.
Stock Last sale Volume 000s Buy quote Sell quote Year high Year low
ANZ $25.30 6 382 $25.20 $25.40 $30.40 $24.20
BHP $37.00 14 607 $36.80 $37.10 $44.20 $36.50
Commonwealth Bank $49.50 5 683 $49.25 $49.75 $51.50 $41.20
Amcor $6.50 4 839 $6.40 $6.60 $7.60 $6.30
Coca-Cola Amatil $8.80 2 239 $8.60 $8.90 $9.20 $8.20
Woolworths $27.50 4 744 $27.20 $27.60 $35.60 $25.60
(a)Which share had the highest last sale price?

(b)Which share had the most trades on this day?
(c)In the past 12 months, which share had the lowest price?
(d)At what price are people prepared to buy Woolworths shares? At what price are people prepared to sell
Woolworths shares? What must happen before a sale can occur?
(e) Using the last sale price, what would it cost to purchase 2000 BHP shares?
(f) Assume you own 2000 BHP shares and they pay a dividend of 40 cents. How much would you receive?
8. ‘It’s easy to lose your money in the stock market.’ Discuss this statement outlining the advantages and
disadvantages of investing in shares.
6.5 SkillBuilder: Reading a sharemarket chart

6.5.1 Tell me
What is a sharemarket chart?
A sharemarket chart provides information on how shares
are performing. It is one form of reporting changes in
the sharemarket. Sharemarket charts are available in
newspapers, on television and radio news and on the
internet. Many factors are included in a sharemarket
report, and not all media may provide data on the same
factors. An example of a sharemarket chart is shown on
the following page.
Some of the factors included in charts and other reports
are: information on share prices, changes in price
and percentage price changes. For example, when a
sharemarket chart mentions ‘net change’, it is referring
to the difference between the current end-of-day share
price and that of the same share on the previous day.
Reading a sharemarket chart
MOVE TURNOVER QUOTATION, DIV YIELD

P/E RATIO
The change The volume of shares BUY AND SELL Calculated daily by dividing
The price/earnings
in price from traded during the The highest bid to the annual dividend per
ratio of a share is
the previous course of the day. buy and lowest share by the share price;
calculated daily by
CLOSE day’s close. offer to sell a expressed as a percentage.
dividing the share
The closing share, recorded at (Special dividends
price by the company’s
price refers the close of trade. excluded; adjusted for
annual earnings
to the price capital changes.)
per share, including
at close of
signiﬁcant items.
trade.
Quotation 52 week
T’over Div P/E
SHARE Share Close Move 100s Buy Sell Yield Ratio High Low
The company’s Bandicoot 67.88 –0.12 30 025 67.63 68.00 3.70 41.24 71.11 51.79 52-WEEK HIGH
name, abbreviated Bank AND LOW
by the Australian This represents
Securities Bilby Bros. 1.29 –0.03 1094 1.29 1.30 N/A 647.50 1.54 0.73 the highest and
Exchange. lowest sales
Different classes Bogong 44.43 –0.79 89 455 44.41 44.72 3.3 16.82 55.72 42.23 recorded during
of a company’s Bank the past year
securities are Cassowary 35.67 –0.56 2112 35.67 35.81 3.8 18.28 38.92 32.36 of trading.
given a separate Ltd
line.
Dingo 5.23 –0.09 9778 5.22 5.25 4.40 22.54 5.52 4.11
Deliveries
Dugong 1.31 +0.05 2455 1.30 1.31 N/A –8.52 1.55 0.95
Chain
Other factors that a sharemarket chart usually includes are the share codes, symbols, dividend rates and
percentage yields. The dividend rate refers to the return per share a company pays to shareholders over a
given period, while the percentage yield refers to the annual income per share, expressed as a percentage of
the cost of the share.
Why are sharemarket charts useful?

Just as a weather report informs people about conditions outside and helps them decide whether to put on a
coat (or take off their jumper) for outdoors, similarly a sharemarket chart tells them about the conditions in
the sharemarket and helps you decide whether to buy (or sell) shares.
An important reason why an investor should be able to read a sharemarket chart is that it provides
important information needed to make decisions about investments. Information about movements in shares
enables investors to decide whether to hold, sell or buy shares in any of the 2000 companies listed on the
Australian Securities Exchange.
Furthermore, in a sharemarket chart, the amount of shares sold and the highest and lowest prices for such
shares may be included. This information is relevant for most investors, economists and advisers because it
helps them in their sharemarket analysis.
6.5.2 Show me
How to read a sharemarket chart
Procedure
Step 1
Recognise the type of sharemarket chart.
Look carefully at the chart heading and the headings of the columns to know what it is showing.
• Some charts divide listed companies into indices according to types such as industrial, metals and
mining, energy and so on. This allows people to compare the financial performance of one company
against other companies in the same sector by displaying the figures in one index.
• Other charts show the performance of the top 20, 50, 100, 200 or 300 listed companies, giving a more
accurate general picture of the way the sharemarket is moving.
• For an overall picture of worldwide share price movements, other charts indicate the general picture in
stock exchanges in the United States, Japan and elsewhere around the world.

Step 2
Learn the meaning of column headings.
Use an Economics dictionary, glossary or the key (which accompanies the chart) to find out what each
column is showing.
Step 3
Look at the data.
• Each listed company has a unique three-letter symbol, for ease of location in online charts or in daily
newspapers. (Use the ASX listed companies weblink in the Resources tab to see the companies listed
on the Australian Securities Exchange.)
• Use a ruler to help you read accurately across the columns.
• A ‘+’ sign in front of a ‘Move’ number means that the value of a share rose against the previous day’s
closing value.
• A ‘−’ sign indicates that the share value fell against the previous day’s closing value.
• Online links allow people to find recent and past financial information about any listed company, using
tables and interactive charts.
Step 4
Analyse the data.
• Examine the size of changes in data for a share from one period to another.
• Look for trends in the movement of shares.
• Compare shares to see how well or poorly one has performed against others.
• Use graphs and online interactive data to further analyse and compare data.
Step 5
Make predictions.
• Consider whether a trend will continue, change pace or change direction.
• Apply your knowledge of current economic events to judge their likely effects on particular shares.
Resources
Weblink ASX listed companies
6.5.3 Let me do it
Complete the following activity to practise your skills.
6.5 Activity
When deciding to invest in a company, it is often a good idea to check the performance of other firms in the same
sector. Use the ASX weblink in the Resources tab to find a list of companies operating in the financial sector.
Select four companies for that sector — one that you are considering investing in, and three competitors — then
answer the following questions.
a. Which companies are you looking at? Write down the name and code of each company.
b. How does the current share price of each company compare with its highest price within the last year?
c. Which company had the highest share price for the day and over the last year?
d. Which company recorded the greatest range between highest and lowest sales price for its shares over the
last year?
e. Compare the number of rises and falls and identify whether, overall, bank shares rose or fell on the day.
f. Explain why figures for one day are not necessarily a good basis on which to buy or sell shares.
g. Using the code for the company whose shares you would consider buying, download or copy a graph
showing its share price movements over a longer period, and explain how this might affect your initial
decision.
h. Summarise your findings for the four companies and justify whether the company you are interested in
presents a good investment opportunity.
Resources
Weblink ASX
6.6 Ethical investments

6.6.1 Investing ethically
When making investment decisions, some people decide to invest only in certain companies or
organisations whose products, policies and practices are in line with their own beliefs and values. This
is known as ethical investment (also called green or conscious or socially responsible investment). It is
becoming more common, as people become more aware of the issues and practices of businesses, that can
damage our society and the environment.
Some examples of issues that might influence the decisions of an ethical investor include:
• the type of products a company makes or sells, such as cigarettes, alcohol or gambling machines
• evidence of unsafe working conditions
• the company forbidding trade unions
• evidence of the exploitation of child labour
• creation of excessive amounts of greenhouse gases
• destruction of old growth forests
• experiments in genetic engineering or animal testing
• creation of excess waste
• firms affecting the Earth’s biodiversity
• involvement in the nuclear industry.
The two most common ways of investing ethically are negative screening and positive screening.
• Negative screening — avoids investing in some types of firms, for example, cigarette companies or
firms that make alcohol.
• Positive screening — involves investing in those firms that are involved in activities which are deemed
desirable, such as renewable energy or healthcare.
COMFACT
Consumers in wealthy countries such as Australia are shocked to
The use of child labour in the
find that frequently their clothes, household goods and sporting
developing world is one of the
equipment are the products of child labour. It is estimated that
ethical issues facing businesses
worldwide over 218 million people under the age of 18 work illegally in
and, therefore, investors.
some form of child labour. This is approximately 14 per cent of all the
world’s children.
Almost half these children will be involved in ‘hazardous work’,
which could threaten their safety or health, such as handling
chemicals, carrying heavy loads or mining. One of the worst types
of child labour is the use of children as soldiers.
Countries with a particularly high incidence of child labour include
Nigeria, Malawi, India, Pakistan and Bangladesh.
The main cause of child labour is poverty. Poor parents do
not necessarily send their children to work by choice, but due to
economic necessity.

CASE STUDY
The Oxfam Shop
Although part of the broader Oxfam charity, Oxfam Shop has firmly established
itself within the market as an ideal store for ethical shoppers. It is a passionate
supporter of fair trade and deals with 60 fair trade organisations around the
world. These organisations support thousands of local and community-focused
producers, including Indigenous Australians. Through fair trade, Oxfam Shop
is part of a global movement calling for an end to unfair trade practices. Fair
trade empowers disadvantaged communities by paying them fair and stable
prices for their work, helping them to gain the skills they need to develop their
business, and giving them access to world markets.
At Oxfam Shop, consumers can discover hand-crafted pieces throughout the online and retail stores. Buying
ethically helps consumers feel they are tackling poverty and making a difference for social justice. Oxfam sells
unique handmade homeware products,
accessories, gifts, and toys. This supports
global artisans and farmers, and An Oxfam store
promotes their traditional manufacturing
methods and culture. Fair trade
allows the manufacturer to benefit directly
from the sale.
Oxfam uses volunteers as retail store
workers. This allows profits to be passed
along to the charity instead of covering
administration and running costs.
Volunteers within Oxfam Shop are
sometimes unemployed people looking
to learn employment skills. This model is
often unique to charity-run businesses
but is successful in presenting another
ethical approach to business.
CASE STUDY
Costa Group
The Costa Group is Australia’s biggest
horticultural company, involved in
growing tomatoes, blueberries,
raspberries, mushrooms, avocados,
citrus and bananas. Their farms are
located in every state of Australia.
The Costa family began the business
as a small fruit and vegetable retailer in
Geelong in 1937. The firm continually
expanded and in 2015 was listed on the
ASX. Currently, it has an annual profit
after tax of over $60 million.
As part of its community responsibility,
it sponsors local sporting clubs, provides
fresh produce to groups and charities,
and works with educational institutions
to promote careers in horticulture.
The company is also committed to sustainable agriculture because they feel this will ensure long-term
profitability. As part of this commitment, they are increasing water efficiency by recycling water as much as
possible, reducing chemical usage, ensuring efficient use of energy and adopting measures to improve soil
fertility.
Resources
Digital documents Worksheet 6.4 Ethical investments — company research (doc-37212)
Worksheet 6.5 Ethical investments — Tassal (doc-32713)
Worksheet 6.6 Ethical investments — Bendigo Bank (doc-32714)
Worksheet 6.7 Ethical investments — Capilano (doc-32715)
Weblinks Oxfam Shop
Costa Group

1. Research your favourite store’s website. Create a list of ethical practices the store has adopted. If your
favourite store is lacking in utilising ethical opportunities create a list of ways that it can improve.
2. Compare Aldi, Coles, Woolworths and IGA, and examine their policies on about ethics within their business.
Pick one element that they need to improve on, and write a letter to your local newspaper outlining your
views.
3. Use the Oxfam Shop weblink in the Resources tab to choose a product you like. List the product’s name
and price. Also, supply details about the people behind the product’s creation and the techniques they use
to make it.
4. Use the Costa Group weblink in the Resources tab to find information about this firm’s products and its
community involvement.

1. What is ethical investment? Give two other names for it.
2. Choose three ethical considerations that concern you. Outline and describe why those three ethical
considerations are of most concern to you and why investors should also act upon your concerns.
3. For the remaining seven ethical considerations, outline how they may each pose an ethical concern to
potential investors.
4. With reference to ethical investing, distinguish between negative and positive screening.
5. List five ways Oxfam Shop assists and benefits its staff and suppliers.
6. When was the Costa Group floated on the ASX? Describe the main activities of the firm.
7. Outline some of the strategies the Costa Group has adopted to ensure their activity is sustainable.
8. Which of the following goods or services would NOT be on a list of ethical investments? Why?
(a) Cosmetics that are tested on animals
(b) Solar research companies
(c) Alcohol and tobacco companies
(d) Companies that donate a part of their profit to charity
(e) Companies in countries that do not support human rights
9. Use the words in bold to complete the paragraph below.
mining India 14 per cent hazardous half incidence
Globally about _______ of all the world’s people under 18 are involved in child labour. Almost _____ of these
children will be involved in ______ work such as handling chemicals, carrying heavy loads, ______or
soldiering. Countries with a high ______ of child labour include Nigeria, Malawi, _____, Pakistan and
Bangladesh.
6.7 The relationship between risk and return

A key factor in investing your money is the rate of return. This is the profit you receive on your investment
as a percentage of the original investment. When investing your money, your main aim is usually to
maximise the rate of return; that is, to make the most profit possible.

The rate of return is given by the equation:
Profit from the investment 100

Rate of return = ×
Original investment Period (years) of the investment
Example:
Faiza invested $10 000 in shares. She sold them one year
later and made a profit of $1500. Her rate of return is:
Profit from the investment 100
Rate of return = ×
Original investment 1
$1500 100
= ×
$10 000 1
= 15%
Therefore, Faiza’s rate of return was 15 per cent on her

investment.
There are two main categories of investment:

1. Growth assets, such as shares and property, which generally provide a higher return over longer
periods. However, these investments are volatile. This means that their prices fluctuate greatly in the
short term so they are higher risk.
2. Income or defensive assets, such as government bonds and term deposits, which usually provide a
lower return but are lower risk — their value does not change dramatically in the short term.
The price of every asset will fluctuate. This is the risk of investing — the higher the rate of return, the
greater the risk involved.
An investment portfolio is a collection of all the investments an individual has. It is generally wise to
invest in as wide a variety of investment products as possible. This would include term deposits, property,
government securities as well as Australian and overseas shares.
The investment seesaw
I like the greater return of

I like the security of
investments in shares and
goverment bonds. For
property. For this higher
this security, I accept a
return, I am prepared to
lower rate of return.
take a bigger risk.
LOWER RISK, LOWER RETURN
GREATER RISK, GREATER RETURN
INV
EST
ME
NT
SEE
SAW
Resources
Digital documents Worksheet 6.8 Investment ups and downs (doc-32716)
Worksheet 6.9 Investment options clueless crossword (doc-32717)
Weblinks ASX
Financial institutions

1. Draw up a list of questions that you could ask a friend, to determine if they have a low or high-risk approach
to making investment choices.
2. Use the ASX weblink in the Resources tab and state the five firms that made the largest gains and losses on
the previous day’s trading.
3. Use the Financial institutions weblink in the Resources tab and prepare a PowerPoint presentation on the
different investment options that these financial institutions have available for people in the Costellos’ situation.

1. Define the term ‘rate of return’.
2. Distinguish between defensive and growth assets.
3. What is an investment portfolio?
4. Describe two ways of purchasing shares.
5. Study the diagram showing the investment seesaw and describe the relationship between risk and return.
6. Calculate the rate of return for the following:
(a) Vic invests $5000 in shares. He sells them for $6000 one year later.
(b) Fiona buys a unit for $100 000 and sells it for $112 000 one year later.
7. Refer to the cartoon about Mr and Mrs Costello.

(a) Construct a table showing each of the Costellos’ investment options and their rate of return.
(b) Does the Western Management Trust or the Happy Managed Trust have the most balanced portfolio?
What would be the risk of investing in the Happy Managed Trust?
(c) Using a program such as Microsoft Excel, construct two graphs which illustrate the investment portfolios
of the Western Management Trust and the Happy Managed Trust. Copy these and paste them into
Microsoft Word or a similar word-processing program. Write a paragraph comparing the two investment
portfolios.
(d) Imagine that you are the Costellos’ investment adviser.
i. Outline the options that you feel would best suit their plan of securing their retirement future. Give
reasons for your answer.
ii. Construct a pie graph to illustrate the investment allocation you have outlined previously.
6.8 Factors influencing an investment portfolio

When an individual or a business is considering investing they need to consider many factors; these include:
risk, return, diversification as well as short, medium and long-term goals.
6.8.1 Diversification
Diversifying your investments means spreading your money across different investment types in order to
spread the risk. This is one of the main principles of investing. Basically it means ‘don’t put all your eggs in
one basket’.
Investment history shows that different investment types perform well at different times. No single
investment will always be the best, but no single investment type will outperform all others over all periods.
For example, shares may be a good investment this year, but the previous year they may have lost value
while property was doing very well.
By putting all your money into one investment, you run the risk of losing a considerable proportion of the
investment. By spreading your money across a range of different investment types, the risk of a fall in the
value of your overall investments can be reduced. A diversified strategy generally provides a greater return.
COMFACT
One of the golden rules of investing is that no-one should invest money that they cannot afford to lose.
Investments should be funded from money that is surplus — never from money that is needed for daily expenses.
An example of the performance of various types of investments commonly found in a diversified

portfolio is shown in the table below.
Overseas Bank term

Property shares Australian Government investments
Year % return % return shares % return bonds % return % return
1 8% 12% 10% 3% 4%
2 13% –18% –8% 2% 5%
3 –10% 9% 11% 3% 4%
4 2% 2% 1% 2% 3%
CASE STUDY
Greg and Julie
Greg and Julie each invested $100 000 for a period of 11 years.
Greg talked to his financial planner who recommended a balanced portfolio comprising 25% in Australian
shares, 25% in global shares, 25% in property funds and 25% in government bonds. His aim was to maintain
this balanced portfolio regardless of what happened.
Julie, on the other hand, became a ‘chaser’, moving her money from one type of asset to the next, depending
on which had the highest return. Unfortunately, this often meant buying assets when the price was high.
Greg also bought and sold assets, but only to return his portfolio to its original 25% weighting for each type
of asset. Greg’s approach meant that he generally bought assets cheaply and sold his best performing assets at
high prices. Since he had diversified, he was not worried about short-term falls in the value of one type of asset.
His was a much less stressful and usually more successful strategy.
The graph below compares the results of Greg’s and Julie’s 11 years of investing.
Julie’s and Greg’s investments

350 000 350 000
Julie
300 000 300 000
Greg
250 000 250 000
Amount ($)
200 000 200 000
150 000 150 000
100 000 100 000
50 000 50 000
0
0 1 2 3 4 5 6 7 8 09 1 11
Years
Often, investors will decide that they don’t want to invest in just one aspect alone, but that they want
to share the risk. This decision can be made before they invest, or after monitoring and wanting to make
changes.
An investment portfolio does not have to be fixed. It can be diverse and be changed as needed.
CASE STUDY
Ethan’s diversified portfolio
Ethan worked hard throughout Year 11 and 12 at his part-
time job. He was able to save $5000, but knew that wasn’t
quite enough for him to travel for a year after finishing his
end of school exams. This was his short-term goal, and
was really important to him. However, he knew upon his
return from travels he would need to have money available
to enrol at TAFE or uni. This was also a goal for his future
— just a longer term one. Ethan was unsure what to do
with his $5000. He decided to diversify his investment
in order to spread the risk. He put $1000 in a fixed-term
savings fund that he could break if he needed cash in an
emergency. He put $1000 in high-risk shares. Another
$1000 was put into lower-risk shares. He then sold his car
for $4000 and combined it with the remaining $2000, and
achieved his dream of travelling.

Upon his return, his fixed savings had made interest profits of $50, the high-risk shares made profits of $400,
with the low-risk shares returning $100. Ethan decided to withdraw all three investments in order to enrol in
tertiary education. Ethan was lucky, though, as his financial advisor told him that if he had withdrawn the high-
risk shares just two weeks earlier, his investment would have been at a loss at that point, and he only would have
received $680 — an amount much less than his initial investment of $1000.
CASE STUDY
Natalie’s Nail Shop
Natalie’s Nail Shop has been doing
well and she has saved $200 000,
as profits retained. This is a possible
deposit for a second shop, or new
equipment and a renovation for
her existing shop. She could also
invest the money to make a return.
Ultimately, Natalie does want to open
a second store in the long term, but
isn’t sure she has trained staff to
manage both stores. Her existing
equipment and shop are still in good
condition; so even though a revamp
of the existing shop is a short-term
goal, it might not be an immediate
goal. After much thought, Natalie
decides to invest the money for a
year, so that she will have more funds
to use in the future as needed.

1. Read Ethan’s case study. Prepare a two-minute speech on how you would invest the same amount of
money if you were in a similar situation to Ethan.
2. Read Natalie’s case study. Prepare a two-minute speech describing how you would invest if you were in
Natalie’s position.
3. You have been employed by a bank to advise customers on the benefits of diversifying their investment
portfolios. Prepare a PowerPoint presentation that you could show potential customers who would be
interested in doing this.

1. Define the term ‘diversifying’.
2. Outline the advantages of diversifying an investment portfolio.
3. Refer to the table in this subtopic.
(a) Which investment provided the best return in each year?
(b) Describe what would have happened to your investment in Year 2 if you had invested only in overseas
shares.
(c) Which two investments always gave a positive return?
4. State the golden rule of investing.
5. This question refers to the document ‘typical dividend statement’ shown below.
A typical dividend statement
Dividend Statement
Ms Takeo Nakai
Payment date: 22 March 2020
6 Creek Street
West End NSW 2877 Record date: 1 March 2020
Reference no.: 566879
Dear Investor,
The details below relate to an interim dividend for the half year ended 31 December 2019
payable on ordinary shares entitled to participate in the dividend at the record rate.
This dividend is fully franked at the Company tax rate of 30% (Class C).
Description Dividend Participating Unfranked amount Franked amount Imputation credit

rate per share holding $ $ $
Ordinary shares 7.5 cents 1,000 0.00 75.00 32.14
Net amount: $75.00

TFN/ABN RECEIVED AND RECORDED
BANKING INSTRUCTION: Commonwealth Bank

Main Street
West End
BSB 792-483 acc no 674219
(a) What type of document is this?

(b) How many shares does Takeo Nakai own in this firm?
(c) According to the document, what is the rate of company tax?
(d) How much is the dividend per share?
(e) How much money did Takeo receive from the firm? What type of income is this?
6. Refer to the case study on Greg and Julie.
(a) Define the term ‘chaser’. Describe the disadvantages of being one.
(b) Which person diversified their portfolio and which one was a chaser?
(c) What was the value of Greg’s and Julie’s investments after 11 years?
(d) How many years did it take Greg and Julie to double their initial investment of $100 000?
(e) How much better off was Greg, who diversified his investment, compared to Julie, who chased the
highest return?
7. Refer to the graph below.
(a) Which person has a balanced portfolio?
(b) Who has invested most of their money in Australian shares?
(c) Which person has invested most of their money in property?
(d) Describe the risks that Sally runs with her current investment portfolio.
Five individuals and their varying investment portfolios
Investment portfolios
Property
Albert
Overseas
shares
Manuel
Australian
shares
Sally Government
bonds
Rosa Bank term
deposit
Minh
0 20 40 60 80 100
Percentage (%)

8. In the case of Greg and Julie, Greg can be classified as an investor, whereas Julie is a speculator. Which do
you think is better? Why?
6.9 Investment planning — maintaining records and

monitoring investments
6.9.1 Short-term investments
A short-term investment is usually an investment of less than three years. These investments are normally
chosen by people who want ready access to their funds. Generally, most long-term investments have a lower
rate of return. This is because of the convenience of being able to convert them to cash in a short period
of time.
CASE STUDY
Laila worked in a well paying job and had paid off her home. She wanted to have a baby soon and would
therefore need to access her savings when she was no longer working.
She felt that a short-term investment would best suit her needs, as she would be able to access her funds
without having to pay expensive fees. She knew she would not make as much of a return with a short-term
investment, but it gave her peace of mind knowing that she could withdraw her money when it was time for her
family to grow.
6.9.2 Long-term investments

Long-term investment are those that are held for over seven years. Generally, the longer the period of
investment the higher the rate of return. (Note: Medium-term investments are those between 3–7 years.)
CASE STUDY
Dov’s grandfather died. Although he was sad, Dov was fortunate to receive an inheritance of $10 000. As he
didn’t need the money at the moment, Dov decided to invest the money long term so that he could get a higher
rate of return.
6.9.3 Modifying investments to maximise long-term gains

Once you have an investment, it must be actively managed, otherwise you run the risk of losing money.
This may involve changing investments in relation to changed personal circumstances, changed economic
conditions or the performance of the investments. Generally in times of economic uncertainty, people invest
in bank deposits, gold or blue chip shares.
The following table shows that, in January of a particular year, Nadi Suri purchased 1000 shares in Lucky
Oil Ltd and 1000 shares in Big Retail Ltd. The value of his Big Retail shares declined dramatically, but the
price of his Lucky Oil shares increased greatly. To maximise his return, Nadi should have sold some of his
Big Retail Ltd shares and used the funds to purchase more Lucky Oil Ltd. Wise investment managers check
their investments several times a day. Nadi was obviously not a wise investment manager.
Shares portfolio for Nadi Suri
Lucky Oil Ltd Value of Big Retail Ltd Value of Value of share
Month share price 1000 shares share price 1000 shares portfolio
January $0.50 $500.00 $8.50 $8500.00 $9000.00
February $0.65 $650.00 $7.40 $7400.00 $8050.00
March $0.85 $850.00 $6.20 $6200.00 $7050.00
April $1.10 $1100.00 $5.30 $5300.00 $6400.00
May $2.55 $2550.00 $4.10 $4100.00 $6650.00
June $3.60 $3600.00 $2.30 $2300.00 $5900.00
6.9.4 Maintaining records and monitoring investments of a

hypothetical investment portfolio
It is important to continually monitor and evaluate your investments. Most people do this by regularly
checking their investment records.
The three main records that shareholders need to keep are:
1. the contract note
2. the CHESS holding statement (CHESS is the Clearing House Electronic Sub-Register System and it
keeps records of all transfers of share ownership)
3. dividend statements, as shown in subtopic 6.8.
These records are needed to prove ownership of the shares and for taxation purposes.
COMFACT
In 2008, the world’s stock markets experienced a meltdown with billions wiped off the value of shares. Many
people, especially self-funded retirees, lost a large proportion of their investments. This event became known
as the Global Financial Crisis or GFC.
Buying shares and then selling them for a profit is subject to capital gains tax. Income received as a
dividend has already been subject to company tax as it was part of the firm’s profit. Dividends on which
company tax has been paid are said to be ‘fully franked’. Therefore, the payment of a dividend does not
necessarily increase an individual’s tax bill.
Investments need to be carefully monitored so that they can be bought and sold at appropriate times.
Wise investors complete an investment tracker, similar to the one shown belonging to N. Tomic, at least
every month but preferably more often. The
shrewdest investors complete these daily.
The tracker is a simple investment monitoring
table. It compares the investments of N. Tomic
in January to the situation in February. All of
Tomic’s investments are added together; this
includes her apartment, term deposit, bank
account and shares. The value of the shares
is calculated by multiplying the last sale price
by the number of shares owned. From the total
value of her investments, she now must deduct
what she owes, such as the amounts owing on
her credit card.

A simple investment tracker for N. Tomic
January February
Shares Shares
Share price owned Value Share price owned Value
Bank term deposit $5000.00 $5000.00
Bank savings account $2000.00 $4000.00
Value of own apartment $150 000.00 $151000.00
Share portfolio
BHP $35.00 400 $14 000.00 $36.00 400 $14 400.00
Commonwealth Bank $40.00 200 $8000.00 $40.50 200 $8100.00
Woolworths $30.00 400 $12 000.00 $32.00 400 $12 800.00
Qantas $6.50 400 $2600.00 $6.00 400 $2400.00
Carsales.com Ltd $15.00 200 $3000.00 $18.00 200 $3600.00
Westpac $25.00 1000 $25 000.00 $25.00 1000 $25 500.00
Telstra $5.50 1000 $5500.00 $5.00 1000 $5000.00
Total value — shares $70 100.00 $71 800.00
Minus credit card balance $500.00 $1000.00
Total value — investments $226 600.00 $230 800.00
Numerous software packages are available for monitoring investments, or you can devise your own
on a spreadsheet. It should be noted that online shares can be monitored with an online dealer, such as
CommSec, while non-online share buyers can monitor their investment by creating a watchlist on the ASX
website at www.asx.com.au/education/myasx-watchlists.htm.
Resources
Digital document Worksheet 6.10 Planning an investment portfolio (doc-32846)
Weblink ASX
COMFACT
The Australian federal government has guaranteed deposits up to $250 000 at all Authorised Deposit-taking
Institutions such as banks, credit unions and building societies. This amount is per individual. Therefore, for joint
accounts each person has a guarantee up to $250 000. This policy is designed to prevent a run on a bank by
people concerned about the security of their money.

1. Using a program such as Microsoft Excel, prepare two graphs showing the value of N. Tomic’s share
portfolio in January and February.

1. Name the three main documents that relate to share ownership, and their purposes.
2. Buying and selling assets, such as shares for profit, is subject to which tax?
3. Refer to the preceding table for Nadi Suri.
(a) Which share had the highest price in January? How had this changed by June?
(b) How much did Nadi spend on shares to begin with?
(c) By how much did the shares in Lucky Oil Ltd increase?
(d) By how much did the shares in Big Retail Ltd decline?
(e) By how much did the portfolio decline in total?
4. Refer to the investment tracking table for N. Tomic. Complete a table for March using the following
information.
Bank term deposit $5 000.00

Bank savings account $3 000.00
Value of apartment $152 000.00
BHP $37.00
Commonwealth Bank $42.00
Woolworths $34.00
Qantas $5.50
Carsales.com Ltd $20.00
Westpac $24.00
Telstra $5.50
Credit card balance $500
5. Explain how Nadi Suri managed his share portfolio very poorly.
6.10 Managing investments and risk mitigation

6.10.1 Personal and economic circumstances
When deciding to invest, individuals and businesses need to take into account any changes in their personal
or economic circumstances.
For example, if an individual was retrenched then the income they had available for investment would
dramatically change and they would need to adapt their investment strategy to reflect this. Similarly, if a
business suddenly was faced with a strong competitor then future plans for investing in larger premises may
need to be put on hold.
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.
As stated in Chapter 2, the economic or business cycle describes the upward and downward movements
of the economy over time. While the level of economic activity affects wages, consumer spending,
production levels, interest rates and unemployment, the level of economic activity can also lead to
variations in investment decisions.
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.
Understanding the economic cycle is useful because
investors can use it to try to time their entry into, or exit from,
the market. Investors could make a gain by buying shares
when prices are lower, and then selling them when prices
have recovered. However, timing the market is very hard to
do in reality. It’s easy to recognise a peak or a trough after it
has already happened, but trying to predict one is much more
difficult.
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.
CASE STUDY
The Global Financial Crisis (GFC)
Even the most cautious investors felt the impact of the 2008 Global Financial crisis (GFC). Australia did not feel
the effects of the GFC as much as other countries. However, this international event had many impacts —
people were scared to make financial decisions, with many attempting to pull their money out of shares to try
to avoid further losses. This had flow-on effects, where the economy kept seeing more ups and downs. It was
a significantly trying time for those in the finance sector, as it changed a lot of protocols and meant that lending
regulations changed.
6.10.2 Risk mitigation strategies for managing investments

With any investment, making the initial decision and then monitoring the investment needs an approach
utilising risk management strategies.
If, after considering the likely consequences and realising there is a high risk, it is vital to follow through
on further risk evaluations or assessments to make sure you don’t lose funds.
Investment risk mitigation is the process of developing strategies to reduce threats to your overall
financial position.
Investment risk mitigation strategies
Identify all possible risks
Rank the risks on probability

of occurring
Are these risks acceptable?
Yes No
Accept and Consider a

continue risk avoidance
monitoring stance
Develop
further risk
mitigation plans
Adapted from: https://www.workiva.com/blog/risk-mitigation-strategies-increase-value-erm
Ultimately, when working through these strategies it is probable that you will come to one of the
following four actions.
1. Avoid the risk. Entirely remove any chance of loss and don’t take that
Avoid
investment avenue, or withdraw funds to avoid further future loss.
2. Reduce the risk. Diversify your investments so that ‘all your eggs are not
in the one basket’. This diversification will mean that there is a reduction Reduce
of possible harm.
3. Manage the risk. Monitor and record your profits and losses.
Manage
4. Transfer the risk. This is frequently done by businesses, where they
give ownership to financial managers, advisers and brokers. This can
also involve insurance to manage risk better, where if there is a big Transfer
loss there is less responsibility.
Individuals and businesses must be aware that when their circumstances change, they may need to vary
their investments. Investments could be added to in positive circumstances, or reduced or terminated under
negative circumstances.

1. Copy the table below. In a small group, discuss three positive and three negative personal or economic
circumstances that may affect an individual or a business.
Positive circumstances Negative circumstances

Individuals 1. 1.
2. 2.
3. 3.
Businesses 1. 1.
2. 2.
3. 3.

2. Construct a plan for an investment portfolio. You have just won $100 000 on a ‘scratchie’ that your
grandmother gave you for your birthday. However, because you are still living at home and your parents
cover all your bills, they want you to invest it until you are 21. Your investment will be locked for five years.
Your portfolio should indicate the following:
(a) Choice of investment/s and why
(b) Projected return/s each year and why
(c) Monitoring plan
(d) Risk mitigation strategy

1. Use the table below to determine if there is a low, medium or high risk for the following scenarios.
Near
Low Medium High High High
Certain
Highly
Low Medium Medium High High
Likely
Likelihood
Likely Low Low Medium Medium High
Unlikely Low Low Low Medium Medium
Remote Low Low Low Low Low
Negligible Minor Marginal Critical Catastrophic

Consequence
Source: https://growthmastery.net/risk-mitigation/
(a) Loaning your friend $20 and having it returned to you

(b) Buying $1000 of shares in a gold prospecting company
(c) Investing $5000 in a start-up business which becomes highly profitable
(d) Investing $1000 in a fixed-term bank deposit
6.11 The role and responsibilities of the financial

services industry
6.11.1 Role of the financial services industry
Many individuals choose to employ specially trained people to assist with their investment decisions. The
role of the financial service industry is to:
• provide individuals and businesses with the tools, advice and guidance to effectively manage their
financial resources
• develop and maintain chosen financial systems and provide the relevant training to support operational
and reporting needs
• provide advice and oversight on the development and management of investments to ensure long-term
financial gain
• ensure transactions are processed accurately, in accordance with laws and policies, and in a timely
manner
• provide guidance whenever needed for contingency and continuity planning
• assist in the identification, evaluation and mitigation of risk
• provide financial reports and statutory remittances.
6.11.2 Financial advice

Financial institutions help individuals in many areas; these include:
• identifying short, medium and long-term goals
• developing strategies to achieve your financial goals
• developing an investment plan
• choosing tax-effective investments
• making the most of your superannuation
• finding out if you’re eligible for any government assistance
• working out your insurance needs
• planning for your retirement
• considering your estate planning needs.
Individuals should start by considering whether they need help with a single issue, like consolidating
superannuation or choosing investments, or if they are after a more comprehensive financial plan.
Businesses will be assisted with any financial decisions they need to make.
6.11.3 The responsibilities of lenders and advisers

Financial institutions provide a range of advice. Consequently, a financial adviser must be licensed by
ASIC, or be an authorised representative of an organisation licensed by ASIC. You can access the financial
advisers register on the moneysmart website to check that the person you are dealing with is authorised to
give you the advice you want.
Responsible lenders obligations include:
• making reasonable inquiries about the consumer’s financial situation
• taking reasonable steps to verify the consumer’s financial situation
• making an assessment about whether the credit contract is suitable based on the information in the first
two obligations.
Additionally, you are trusting the financial adviser with your money. You need to know they are qualified
to be using your funds appropriately.
CASE STUDY
Lin wants to invest his money in high-risk but high-return opportunities. Mark likes to make safe decisions, and
is aware that investing more conservatively won’t bring him a return as lucrative as Lin’s. They decide to go to a
qualified financial adviser in order to make sure their needs are met. When they meet their adviser, Natasha, she
gives them both a profile to fill in, as well as a personality quiz. Lin and Mark give different answers and come out
of the quiz with different investment ‘personas’. Natasha explains that she will prepare investment advice based
on their profiles. Lin and Mark each receive different advice, suited to their particular personal needs, and realise
Natasha knows what she’s doing. They were very pleased they found a competent financial adviser who was on
the register.
Resources
Weblink moneysmart

6.11.4 The role of government agencies — ASIC
The Australian Securities and Investments
Commission is an independent Australian
government body that acts as Australia’s corporate
regulator. ASIC’s role is to enforce and regulate
company and financial services laws to protect
Australian consumers, investors and creditors.
This government agency is important, as its role
is to maintain the financial system and monitor
investment practices, which directly impacts our
nation’s wealth.
CASE STUDY
Researching investment options
Jayden-Lee started researching investment options on
the internet. The next day, he scrolled past an ad on
Instagram about an investment seminar the following
weekend. He purchased his ticket and attended the
event. When he got there, Tony was assigned to be his
investment adviser. Jayden-Lee and Tony formed an
instant bond, with Tony making a few jokes and having
a bit of a laugh. At the event, there were many options
to invest in on the spot. Jayden-Lee was unsure of
what to do, so he asked his adviser. Tony took him
to meet someone that he seemed to know and said,
‘Jayden-Lee wants to sign up for your stocks’. Jayden-
Lee then gave Tony a cheque for $10 000 to invest for
him. At the end of the event, Tony said that he would be
in touch to advise Jayden-Lee as to how the investment was going.
After a month, Jayden-Lee hadn’t heard from Tony. He rang him and Tony assured him that the money was
growing in size. Reassured, Jayden-Lee relaxed.
Three months later, Jayden-Lee decided he wanted to use some of the profits to go on a small holiday. He rang
Tony and asked for him to withdraw $1000 from the investment. Tony stammered ‘Ummm, sorry mate. I can’t
do that at present. The market’s had a turn and your funds are really low at the moment. Don’t worry though, we
will grow them again soon enough.’ Jayden-Lee felt immediately worried, ‘Tony, how much is left? I gave you
$10 000!’ Tony baulked, ‘I’ve got a call coming through, I’ll call you back.’ Tony didn’t call back. Jayden-Lee then
rang Tony several times over the next few days. He got no answer and was increasingly worried. He had no idea
what to do.
6.11.5 Current issue — banking deregulation

Investment opportunities slowly changed in Australia when the federal government started the process
of deregulation in 1973, which saw the removal of some of the strict rules regarding how banks operated
in Australia. This included allowing foreign banks to open branches and a range of alternative financial
institutions, such as building societies, credit unions and superannuation funds arose to compete with the
banks. This deregulation continues today, with further changes resulting from the 2019 Banking Royal
Commission.
The Australian Prudential Regulation Authority (APRA) oversees authorised deposit-taking institutions
(ADIs): banks, credit unions and building societies. ADIs are authorised to take deposits from customers
under the Banking Act 1959. Deposit-taking institutions pool these deposits. This means they put them
together and then lend them to individuals and businesses in the form of loans and mortgages.
The financial sector has recently seen the start-up of many new banks, which are online-only banks. They
provide many of the functions of traditional banks, such as Westpac, NAB and the CBA, but do not have
any branch network. Customers access the bank’s services though the internet, telephone, ATM or via an
app on their smartphone. Some popular internet-only banks in Australia include ME Bank, ING, Volt Bank
and UBank.
Deregulation of the banking sector in Australia has allowed foreign

banks to enter the market and compete with local banks.
Banks
Banks offer a wide range of financial services to all
ATMs are one of the many services
participants in the Australian economy — accepting deposits; offered by banks.
offering credit cards, cheques, overdrafts, investment and
savings accounts; and lending money through personal loans,
business loans and mortgages. Banks also provide other typical
banking services such as internet banking, automatic teller
machines (ATMs) and financial advice.
A bank savings account is an easy and safe place for people
to keep their money. This type of account allows you to deposit
money and make withdrawals. In return for your deposits,
the bank pays you money known as interest. The amount of
interest paid depends on the type of account, the number of
times interest is paid into the account each year and the amount
of money in the account.
A bank is a business that wants to make a profit, so it accepts
money as savings (deposits) at a lower interest rate and lends
that money at a higher interest rate. Depending upon the type
of savings account you hold, your interest earnings could be anywhere from 0.2 per cent up to around
3 per cent. For borrowing, interest payments vary depending on the type of borrowing, and can range
between around 3.5 per cent on a variable mortgage and over 13 per cent on some credit cards.

Banks act as intermediaries between lenders and borrowers.
Deposit money Provide loans such as mortgages
Lenders BANKS Borrowers
Pay a small amount of interest Pay back loan plus interest
Credit unions
A credit union is a financial institution that is
People’s Choice Credit Union is owned by its
owned and operated entirely by its members. Credit members. Its purpose is to help members save and
unions provide a range of products and services borrow money.
that are similar to those offered by banks. These
include accepting deposits, offering personal and
home loans, and providing payment services such
as credit cards. To open an account with a credit
union, you have to be an ‘eligible’ member. Every
credit union has its own rules for determining
eligibility, but it sometimes means that you have
to belong to an industry affiliated with the credit
union or be related to an eligible member. Because
a credit union is focused on the financial wellbeing
of its members, maximising profit is not its main
objective.
Building societies
Like credit unions, building societies are owned
Building societies originally helped their members to
and operated by their members. As their name buy homes, but over time they have become more
suggests, building societies historically supported like banks.
their members in purchasing homes. In more
recent times, building societies have expanded to
offer similar services to banks. As deposit-taking
institutions, building societies accept deposits from
customers and provide loans and payment services.
There are now less than ten building societies in
Australia because many of them have converted to
or merged with banks.
Resources
Weblinks APRA
ASIC
ASIC — How to complain
ASIC — Invest smarter
1. ASIC is an independent Australian government body that acts as Australia’s corporate regulator. In small
groups, or independently, research ASIC’s role and responsibilities . Create a brochure, poster or infographic
that outlines:
(a) why individuals should use ASIC
(b) why businesses should use ASIC
(c) the importance of ASIC to the Australian economy.
2. Use the APRA weblink in your ON Resources to find one Australian-owned bank, one foreign-owned bank,
one credit union and one building society.

1. What is an authorised deposit-taking institution?
2. Name two internet banks.
3. In what year did the banking sector start to be deregulated in Australia?
4. Go to the ASIC — Invest smarter and ASIC — How to complain websites and create a list of what
Jayden-Lee should do to try to seek redress.
5. Create a list of responsibilities that a financial adviser should adhere to.
6. How has deregulation assisted consumers looking to invest?
6.12 Thinking Big research project: It’s a risky

business
Scenario
Shares are an ownership interest in a public
company. People invest their money in these shares
hoping that if the company does well, some of the
profits will be returned to the shareholders in the
form of dividends, or that the value of the shares
will increase over time and the shareholder will
make a profit if and when they sell these shares at a
later date.
All manner of people invest in shares – for
example, investors, superannuation companies and
retirees. It is also possible your parents might have
invested some of their money in shares. However, buying shares can be a risky business. Shares often fall
in value and this can occur quickly, leading to severe economic consequences such as the Great Depression
and the Global Financial Crisis.
Task
Watch one or more of the videos suggested in the following weblinks, to gain an insight into how the
decline in the stock market caused the Great Depression and/or the Global Financial Crisis.
Once familiar with the concept of financial risk through investing in shares, your task is to write a report
on the subject by referencing the share prices of five companies you have researched.

Process
• Work individually.
• Using the Australian Securities Exchange (ASX) website, select five companies you may be interested
in. Some companies that may be of interest include:
• Woolworths
• JB Hi-Fi
• Commonwealth Bank
• QANTAS
• Telstra
• NAB
• BHP
• Using information from the ASX website or directly visiting the website of the selected companies, for
each company:
• summarise what the business does
• summarise what industry it operates in
• identify where it is based
• state how many people it employs
• state when it was started
• identify any major announcements made by the company in the last 12 months.
• Chart the share price of the companies selected over a 5–10-day period (your teacher will provide a
time-frame for this research). Prepare this information in a graph.
• Prepare a report on each company, identifying whether you believe the company is currently a high,
medium or low risk investment. Provide reasons for your conclusions.
Resources
ProjectPLUS It’s a risky business! (pro-0201)

Digital document Worksheet 6.11 Financial services (doc-32847)
Weblinks Hard Times: The Great Depression

The Great Depression – 5 Minute History Lesson
The 2008 Financial Crisis: Crash Course Economics #12
Australian Securities Exchange (ASX)
6.13 Review
6.13.1 Summary
Having explored this topic, you can now:
• determine that investing is a financial activity that many people undertake as a way of wisely using
their assets and money to increase financial gain
• explain how a profitable gain is possible, with investments providing an opportunity for personal
growth as well as financial success
• identify how an individual can weigh up all their options and adequately plan for investment
• discuss the many decisions that need to be made regarding investment choice, including:
• the type of investment
• how to assess the relationship between risk and return to make decisions about how much to invest
• ethical considerations
• which investment option to take
• how to monitor investments in relation to changes in personal and/or economic conditions
• how to maximise long-term investment options
• profit – income required
• how to spread the risk
• following paperwork procedures
• identify considerations regarding ethical investment decisions
• outline the role and responsibility of financial advice services
• describe the importance of ASIC
• research current issues that affect investment options.
6.13.2 Key terms glossary
assets items of value
blue chip shares very safe and secure shares
capital gains tax a tax on the profits arising from the increased value of assets such as shares or property
capital growth value of an asset increases over time
company tax a tax on the profit of a company
cryptocurrency a digital currency in which encryption techniques are used to regulate the generation of units of
currency and verify the transfer of funds. Cryptocurrency traders operate independently of a central bank
debenture a document that is issued by a firm when you lend it money. It states the amount, interest and term of
the investment. If a firm is liquidated debenture holders are one of the first to be repaid
dividend part of a firm’s profit that is divided amongst shareholders
economy all activities undertaken for the purpose of production, distribution and consumption of goods and
services in a region or country
entrepreneur a person who sets out to build a successful business in a new field. An entrepreneur’s methods are
sometimes regarded as innovative
ethical acceptable to society’s current standards
fixed interest rate interest rate that remains the same for the period of the loan
income and expenditure account an ongoing record of income earned and money spent during the previous
week
investment the use of money to purchase equipment or premises for the establishment of a new business or the
expansion of an existing business
investment portfolio all the investments owned by an individual
managed fund a pool of money that comes from people who have similar investment goals, and invested in
assets such as shares or property, by a fund manager
market(s) an exchange of goods, services or resources between buyers and sellers
mortgage a loan from a financial institution such as a bank where something is held as security in case the loan
is not repaid, e.g. a house
rate of return the profit you receive on your investment as a percentage of the original investment
share a part ownership of a public company

sharemarket place where shares in public companies are bought and sold
stockbroker individual or firm that specialises in buying and selling shares
superannuation money put aside and saved while you are working; commonly called ‘super’
superannuation fund a managed fund designed specifically to produce benefits when you retire
unsecured note Similar to a debenture. A document that is issued by a firm when you lend it money. It states the
amount, interest and term of the investment. An unsecured note holder is one of the last to be repaid if a firm is
liquidated
variable interest rate rate that moves up or down depending on market forces
Resources
Digital documents Key terms glossary (doc-32669)
Match up (doc-32755)
Crossword (doc-32789)
Wordsearch (doc-32800)
Interactivities Wordsearch (int-7903)
Crossword (int-7886)
6.13 EXERCISES
6.13 Exercise 1: Glossary quiz

6.13 Exercise 2: Multiple choice quiz
1. Which of the following is a reason you might have surplus funds to invest?
A. Your income is fairly predictable.
B. You work numerous jobs.
C. You save money after paying your bills.
D. All of the above
2. When discussing investment, what is a stock?
A. A partial ownership of a company
B. A regular payment
C. A type of soup
D. Government interest bodies
3. Which of the following best describes a small amount of gain based upon savings in a bank?
A. Interest
B. Dividends
C. Capital gain
D. Equity gain
4. Which of the following is a financial asset?
A. Equipment investments
B. Personnel investments
C. Bonds
D. Property investments
5. When someone spreads the load of risk, this is called:
A. dividing
B. diversification
C. denomination
D. difference.
6. What is a stock?
A. A partial ownership in a company
B. A government investment
C. Property ownership
D. Savings
7. Which of the following is the term for regular income from owning stocks?
A. Capital gains tax
B. Savings
C. Dividends
D. Salary
8. Pick the most appropriate response. Financial advisers should:
A. be licensed and provide those details to you upon request
B. provide sound advice that is inline with your preferred level of risk
C. do nothing without your permission
D. All of the above
9. The market price of a company’s share of a common stock is determined by:
A. the board of directors
B. the stock exchange decision
C. the CEO
D. individuals buying and selling the stock.
10. What is a risky investment?
A. An investment in something completely new with minimal knowledge share
B. An investment in something that has fluctuated a lot
C. An investment in a failed or previously bankrupt company owner
D. Any of the above
6.13 Exercise 3: Knowledge and understanding

1. List three reasons why people invest.
2. List three reasons why businesses invest.
3. Match the following to the correct definition:
Asset dividend ethical rate of return superannuation
Definitions:
(a) Managed funds to give financial support when you retire
(b) Something of value
(c) The profit you receive on investment
(d) Part of a firm’s profit that is divided amongst shareholders
(e) Acceptable to the standards of society
4. Abdullah won $10 000 at his local football club’s raffle. Outline three investment choices he could make
and describe why Abdullah might choose each one. Rank each choice from lowest to highest risk.
5. Outline three reasons why retirement plans are important.
6. Differentiate between immediate, short-term and long-term financial goals.
7. Create a checklist someone could use in their day-to-day life to help them save.
8. What is a fixed interest rate?
9. What is a variable interest rate?
10. Select which option below will have a lower interest rate and explain why.
(a) A home loan
(b) A short-term loan
11. Complete the following table:
Investment type Description Advantages Disadvantages

Savings accounts
Shares
Property
Managed funds
Superannuation
Debentures
Unsecured notes
Cryptocurrency

12. Design a poster promoting ethical investment.
13. Analyse how people ensure that they are more likely to make a financial return on their investment.
14. In words, explain the numeracy behind an investment of $5000 using rate of return principles.
15. Describe the changing nature of investing in today’s economy.
16. Why should someone diversify their portfolio?
17. Create a checklist for keeping sound investment records.
18. What is the main source of government advice regarding anything to do with financial advisers?
19. Research and prepare a report on a current issue listed below. Your report should cover an introduction
about the business, an outline of the issue the business is facing, positives of investing in the business,
negatives of investing in the business and then a conclusion of your findings.
The issues you can choose from are:
• The Body Shop and ethical treatment of animals in the cosmetic industry
• Adani Group (coal mine) and the impact on the Great Barrier Reef
• Woolworths and the liquor/gaming scandal
• George Calombaris and the underpayment of wages in the restaurant industry
• 7-Eleven worker exploitation
• Domino’s Pizza class action lawsuit
• Hotel Eclipse (in Poland) and intellectual property theft
• Another issue of your choice upon negotiation with your teacher
6.13 Exercise 4: Challenge your understanding
1. Explain why it is important for businesses to make wise investment decisions.
2. Outline why individuals require sound financial advice before making investment decisions.
3. Explain why it is important for investors to monitor the economic cycle.
4. Evaluate why investment trends will continue to change over time.
5. Analyse the investment world within Australia, comparing it to that of an overseas country of your choice. In
your answer, link the impact investments can have upon the economy.
Resources
Digital documents Worksheet 6.12 Wrap up! (doc-32811)
Glossary quiz (doc-32767)
Multiple choice quiz (doc-32778)
eWorkbook Customisable worksheets for this topic (ewbk-0863)
Test maker
Create custom tests and exams from our extensive range of questions, including quarantined topic tests.
Access the assignments section in learnON to begin creating and assigning custom assessments to your students.

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6.2 Reasons for investing

TOPIC 6 Investing 359

6.2 Activity: Research and communication

6.3 Financing your investment

6.3.1 Saving for an investment

TOPIC 6 Investing 361

6.3.3 Income and expenditure account

A typical income and expenditure account

Income and expenditure account of Khanh Nguyen

Date Income Amount Date Expense Amount

1 Jul Balance available to invest $30.00 1 Jul Rent $60.00

1 Jul Pay for casual work $200.00 2 Jul Magazine $8.00

3 Jul Medicare refund $17.00 4 Jul Groceries $27.00

6 Jul Interest on deposit $47.00 5 Jul Donated to Red Cross $5.00

Total income $294.00 7 Jul Mobile phone $20.00

.... .................... ...... Total expenses $120.00

7 Jul Balance available to invest $174.00

.... ................... .....

8 Jul Balance available to invest $174.00 8 Jul Rent $60.00

8 Jul Pay for casual work $208.00 9 Jul Groceries $29.00

12 Jul Medicare refund $20.00 11 Jul Doctor’s bill $18.00

14 Jul Birthday gift $50.00 11 Jul New fishing rod $50.00

Total income $452.00 12 Jul Internet $18.00

13 Jul Entertainment $36.00

14 Jul Petrol for car $23.00

Total expenses $234.00

Balance available to invest $218.00 14 Jul Balance available to invest $218.00

6.3.4 Superannuation as an investment form

6.3 Activity: Research and communication

6.3 Exercise: Knowledge and understanding

TOPIC 6 Investing 363

Date Income Amount Date Expense Amount

Date Item Amount

7 Jul Total and calculate the balance of the week’s accounts $?

8 Jul Pay day — received $210.00

14 Jul Total and calculate the balance of the week’s accounts $?

6.4.1 Investment accounts

A cash management account is similar to a

for a set period of time (the term) in order to

TOPIC 6 Investing 365

6.4 Activity: Research and communication

TOPIC 6 Investing 367

(a)Which share had the highest last sale price?

6.5 SkillBuilder: Reading a sharemarket chart

MOVE TURNOVER QUOTATION, DIV YIELD

Why are sharemarket charts useful?

TOPIC 6 Investing 369

6.6 Ethical investments

TOPIC 6 Investing 371

6.6 Activity: Research and communication

6.6 Exercise: Knowledge and understanding

6.7 The relationship between risk and return

TOPIC 6 Investing 373

Profit from the investment 100

Therefore, Faiza’s rate of return was 15 per cent on her

There are two main categories of investment:

The investment seesaw

I like the greater return of

6.7 Activity: Research and communication