Provide a description of the following investment options and elaborate on the risk factor of each, unit trust, managed portfolio, shares, debentures and fixed property
Answers
There are different types of investment policies and risk factors involved with it.
• Cash – Risk factor with this type of investment is minimum. The money value gets eroded with time.
• Bonds – You can try and invest in government owned bonds, but are little more riskier as compared to cash. The moment is lend to another company for investment.
• Property – property when invested as commercial investment can offer with much better returns as compared to any other form of investment. The income can also be stable if you invest in commercial property.
• Equities – The risk factor is maximum with this type of investment. Your research is also very much important as you need to look around for stable market.
Risk factors
• If you have invested in bonds then the investment growth would depend on the performance of the company.
• In case the investment is made in unsecured loans then risk factor will also increase. You may not have any security involved in investment.
• Liquidity risk factor is also involved so you need to ensure that investment is made in a safe place.
• Rate of interest in any type of investment is also important as if the rate of interest is low then you may not get best returns.
Unit trust - is a very safe form of investment, a kind of mutual fund effectively managed by a trust. It has substantially low returns compared to other forms of investments.
Managed portfolio - is defined as a process where an investment house looks after the investment interests of an individual. It is tailored for beginners in the field of investment.
Shares - are probably the most lucrative, and highly rewarding, but equally risky. Buying a share is buying into a company’s fate. When the company does well, you gain or else you lose.
Debenture - is a form of long term investment, where you buy company’s security at a fixed interest rate.
Fixed property - is generally assumed as an asset used to breed income.