Risk and return A key factor in investing. your money is the fate of return, This is the profit you receive ont your investment as a percentage of the original Is. to make the most profit as possible. The rate of return ls given by the equation: Profit from the invesument 200 sateen; reste: _g,_000) _ MERI” Original investment “ Period (rears) of Example: ‘Yaiva invested $1000 in shares. She sold them one year later and made a profit of $1500. Her rate of Profit from thy Rate of return Jnvestment , 100 “onginal investment“ a $1500. 100 $1000 “4 “There are two main categories of investment: 1. Growin assets, such as shares and property. which, Dertods. However, inese investments are volatile ‘This means that their prices fluctuate greatly in the short term so they are higher “isk. 2. Income or defensive assets, such as government ‘bonds and term deposits, which usually provide a not change dramatically in he short tere ‘the price of every asset will Muctuate. This 4s the Fisk of investing — the higher the rate of return, the reater the risk involved. An investment portfolio is a collection of all the Investments an Individual has. Tis generally wise to invest in ae wide 4 variety of invortmont products 3s possible. ‘This would include term deposits, property, Shares. 254 New Concers me Commence Property Coastal tand ‘1000000 Value to double: in years, Contect ABC Bank Cash management year. I think the share Faris price will rise to $12 Paying 4% per yoar Yormoxt 8 yoara. like the greater return of invertinentr in shores SHEN egy Taka Bigger nie Understand 2”"Define the term ‘rate of return’. 2 Explain the difference between defensive and groweh 3. What isan investment portfolio? & Describe two wave of purchasing shares. 5 Stuay'the diagram showing the Investment Seesaw and describe the relationship between risk and return, G) Vieinvests $5000 in shares. He sells them for ‘$5000 one year inter (8) Flona buysa unit for $100.000 and sells tfor ‘si2 000 one year later. () Construct a table showing each of the Costelles” Snwestment options and their rate of rata. (0) Does the Western Management Trust or the Happy Managed rust have the mest balanced portfole? What would be the risk of vesting in the Happy Managed trust? (© Using's program such as Microsoft Excel, construct {wo graphs which filustrate the investiment portfolios ofthe Western Management trust and ‘the Happy Managed trust. Copy these and paste them inte Microsoft Word or a similar word processing program. writes paragraph comparing fhe two imestment portiotios, (© Imagine that you are the Costelles' investment. advice “@) Outline the options that you feet would bestSelecting a mix of investments Spreading the risk Diversifying your investments means spreading your ee erro ee ee ey Have lost value; while property war doing very well” ur tnttson be sane h Ganimacs tone peter oF the investment. By spreading your money across Glrange of duffereat investment types, tie Tsk of @ reduced. A diversified strategy senerally provides She table bolow shows a typical result over Sopeian Fears of the performances of various types of (eta ‘One of the golden rules of investing fs that no-one should Dividend Statement Payment date: 22 March 2010 Record date: + March 2010. Reference non 506879 snd for the hall year enced 34 December 2009 payable on ordinary This dividend is fully franked at the Company tax rate of 30% (Class). a eae ameum | Frantedamount | pstnion ih Netamount $75.00 ‘TFN/ABN RECEIVED AND RECORDED. Grog and Jutio Gregand dulie exch invested $100000 fora period of a balanced portotie comprising 23% in Australian shares. ‘Zanein global sharce, 25% in property funds and 25% in Pertiolo regardiec: of what happened. ‘Sulte, on the ether hand, became = Chaser’, moving her eS ee a ae “hich hed the hight retum. Untortunatety, this often Sssets cheaply and sold his best performing assets at hhigh prices: Since he had diversified, he waz not worried Shout short-torm falls inthe value of one type oF asset PSeiS em ayer P SEEESI SREY asin nimacnent 2 ER nce ae IS eh A an et ten ino (0) Bescribe what would have happened to your investmentin Year #f you tied tested ony Im (© Which two investments always gave a positive return? How much money did Takeo receive from th Refer to the case stdy on Greg and Jute (Define the term chaser! Boseribe the disadvantages oF being one cnewmes chaser? * porttotio ang wine (© What was the valve of Greg’s and Jutie’s investments Now maty yoars did 1 take Grog and dullo te double their inital investment of 8100 000° ° "Wino enasea the (His was a much less stressful and ususlly more succesafu seoteay. “ihe araph below compares the results of Gres’ and utter years oF investing. G) Which person has.a balanced portfolio? () Who has invested mostoFthele money in Australian shares? (© Which person has invested most of theiemeney in Dropertye (a) Deseribe the risks that Sally runs with her current ‘Five tndtwituats and these vorying investment portrotios 2 ou navs toon coved by bark to advicgcurtomers on Prepare a PowerPoint presentation that you could show potential customers whe wowid be interested in doing Greg can be classified az an invertor, whereas Julie fea Speastator which so you thin tebatver? why?