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26 Cards in this Set

  • Front
  • Back

How is investing different to saving ?

Investing is using money to make more money and saving is just keeping the money

Explain how capital gain is different to capital loss

capital gain is when the sale price is more than the initial cost and capital loss is when the sale price is less than the initial cost.

What is an investment portfolio?

An investment portfolio is the range of investments held by an individual

What is the minimum amount of money required to begin an investment portfolio?

$500

Why is property a difficult market to enter?

It is expensive to afford with just your savings.

Gearing is also known as leveraging. Define this term.

Borrowing for the purpose of investment, such as purchasing a share portfolio or 'using a mortgage' to purchase a house

What is negative gearing?

Income gained is less than repayments

What are the advantages of negative gearing?

- purchase an asset that may increase over time


- reduces the amount of tax you have to pay


- helps promote national growth

List some disadvantages of negative gearing

- asset could fall in value


- interest rates could increase


- the loss you need to make to reduce your tax has to be funded out of your other sources of income

Define ethical investing

Investing in assets that are considered to be morally sound- those that are not socially or environmentally sound

Distinguish between positive screening and negative screening

Negative- not investing in particular companies because they are unethical and positive is investing in socially or ethically responsible companies.

List the four investment options

- cash


- fixed- interest


- property


- shares

What are the advantages of cash?

- easy access


- can put in a cash investment account

List the disadvantages of cash

- not a good way to make money


- easy to rob

What is fixed-interest?

Agreements to pay a certain amount of mine on a fixed date.

What are two advantages of fixed-interest

- higher the interest rate, the lower the price


- bonds can be sold before the end of an investment term.

What are some disadvantages of fixed-interest?

The market is volatile

What are the advantages of investing in property?

- actual object rather than piece of paper


- investor has more control

What are the risks of investing in property?

- bad tenants


- no tenants

What are shares?

Part ownership of a company

What are the advantages of buying shares?

- get paid through dividends


- capital gain

What are the disadvantages of investing in shares?

- share markets can be volatile


- economic recessions

Risk and return diagram

Back (Definition)

Explain how diversification can reduce overall risk in investing

Investor can invest in a variety of investment types and in various investments. Improves rate of returns in the long run.

What is the All Ordinaries Index?

A measurement of the average movements in the share prices of a selection of major Australian companies.

Three main factors of investing

- goals of investor


- time period being considered for investments


- risk tolerance of investor