- Unit 2
There are many options for investment. This unit of work covers:
- Investment accounts
- Managed funds
- Debentures and unsecured notes
Many financial institutions including banks, building societies and credit unions offer investment accounts. This includes:
- cash management accounts
- internet accounts
- term deposits
In cash management accounts, you can deposit and withdraw funds whenever you want, and it has a high rate of interest. However, a substantial minimum amount must be kept (e.g $5000). Internet accounts are only accessed through the internet with high interest rates and low fees, but can have it’s limitations. Term deposits are sums of money deposited with a financial institution that has to be left there for a set period of time to receive higher interest rates. No withdrawal or deposit can occur to keep the high interest rates. It offers a reasonable level of return.
Shares are part ownership of a public company, bought and sold on a stock exchange. Selling the share when the price is higher than when you bought it can gain you a profit!!!
Shareholders can also receive dividends which are part of the firm’s profits that is divided amongst shareholders.
Usually people use stockbrokers to buy and sell shares, but you can also use a internet broker e.g CommSec.
Property values can appreciate, or can generate extra income (e.g rent). Although saving up to purchase a property can incur additional fees (eg paying rent while saving) once you do you might not need to pay rent.
A pool of money sourced from many people with similar investment goals. It is managed by a fund manager.
A managed fund that saves up for retirement benefits. It is compulsory in Australia. Employees and employers contribute money to a superannuation fund.
A debenture is a legal document issued by a firm when you lend it a sum of money. It is a relatively save investment.
Unsecured notes are similar but they aren’t as safe. As opposed to debentures, unsecured notes will be the last to be repaid if a firm is liquidated. They attract a higher rate of interest.