Commerce

Investing is the act of allocating money into assets or ventures with the expectation of generating income, profit, or appreciation over time.

Consumers might invest to save for future needs, retirement, or wealth growth, while businesses may invest to expand operations, increase profitability, or maintain a competitive advantage.

1. Debt financing: Borrowing money to fund investments, like bonds. 2. Equity financing: Raising funds by selling ownership stakes, like issuing shares.

1. Stocks: Equity ownership in a company with high return potential but high risk. 2. Bonds: Loans to companiesovernments with fixed interest, offering regular income but lower returns. 3. Real estate: Property investment for rental income or resale, with high upfront costs and maintenance. 4. Managed Funds: Pooled investments managed professionally, with fees and no control over individual investments. 5. Term deposits: Fixed deposits with guaranteed returns, offering low risk but limited liquidity.

Consider interest rates, fees, investment horizon, risk tolerance, and potential returns.

Purchasing costs are initial expenses like down payments and legal fees, while holding costs are ongoing expenses like maintenance, insurance, and mortgage interest.

Gross rental return = Total annual rent ÷ Property cost. Net rental return = (Total annual rent - Expenses) ÷ Property cost.

Negative gearing is when an investment property’s costs exceed its income, creating a tax-deductible loss.

Positives: tax benefits and potential capital gain. Negatives: risks of loss and reliance on property appreciation.

Flipping is buying, renovating, and selling properties for profit, with high profit potential but also high risk and upfront costs.

Share Market: Platform for buying and selling shares. Share: Unit of company ownership. Dividend: Payment from company profits. Capitalisation: Total market value of company shares. Settlement: Process of finalizing a share transaction.

Investors, brokers, and financial institutions.

Market Capitalisation = Share price × Total shares. Dividend returns = Dividend per share × Number of shares. Dividend yield = Dividend per share ÷ Share price × 100%.

Full-service brokers provide investment advice and services, while no advice brokers execute trades without providing advice.

Covid-19 caused increased volatility, lower stock prices, changes in inventory behavior, and a market crash.

Risk is the potential for financial loss, and return is the profit or income from an investment.

Growth assets offer higher returns but higher risks (e.g., stocks), while income/defensive assets offer lower risk and steady income (e.g., bonds).

Ethical investing is based on social, environmental, and ethical principles.

Negative screening avoids investing in unethical companies, while positive screening selects companies with positive impacts.

Diversifying is spreading investments across assets to reduce risk.

Minimizes losses and increases portfolio stability.

Risk mitigation is planning for disasters to reduce negative impacts.

Diversify your portfolio, invest in low-risk assets for stability, and avoid speculative investments without research.

Avoid high-risk investments when needing stability, long-term investments when needing quick cash, leveraged investments if uncomfortable with debt, and speculative investments without thorough research.

The financial services industry provides financial advice, loans, investment options, and wealth management.

Banks, credit unions, investment firms, and brokers.

Provide honest, accurate advice and ensure clients understand risks.

The Banking Royal Commission investigated misconduct in Australia's financial sector to restore public trust and recommend reforms.

Conflict of interest is when competing interests could affect someone's judgment or decisions.

The Banking Royal Commission found that some institutions charged fees for services that were never provided or were insufficient.

Identify costs (initial and ongoing) and calculate gross and net rental returns: Gross Return = (Annual Rent ÷ Purchase Price) × 100%. Net Return = [(Annual Rent - Annual Expenses) ÷ Purchase Price] × 100%.