LEARNING ACTIVITY SHEET

Grade Level/
Grade 12 – Business Finance Quarter 2
Subject

Topic TYPES OF INVESTMENT Week 1

Compare and contrast the different types of 4

MELC Duration
investments hours

1. Identify the types of investments particularly bank

deposits, insurance, real estate, hard assets,
Specific mutual funds, and stocks and bonds
Score
Objectives 2. Distinguish the advantages and disadvantages of
each type of investment.
3. Assess the risks inherent in each type of investment

I. Let’s Know

Investing involves taking a risk with money, such as by buying stocks or bonds, in the hopes
of realizing higher long-term returns. Investing may yield a higher return with higher risk
(O’Shea, A., 2020).

TYPES OF INVESTMENT

Stocks

Commodities Bonds

Investment

Property Mutual Funds

Insurance Bank Deposits

Tolani, S.R. (2020). Financial Planning Book. Dr. Sanjay Tolani Publishing.

1. Stocks - refer to ownership in a company. You can get this by buying stock or shares
or some form of securities. It is a form of investment in a company. When buying a
stock, you get a share – a small piece of the company to earn high returns. A company
sells stock to increase its cash. This investment comes with a higher risk than other

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 forms of investment. A company can go out of business and lose its value means it’s
no guarantee.

Investors can make money when their value of stock increases and they plan to sell it
for profit. Stocks also pay dividends from the company’s income and some companies
do not.

2. Bonds – these are issued by government companies paid at a fixed level of interest.
You allow the bond issuer to use your money and promise to pay in full with interest.

This is safer than stocks form of investment but lower in returns. Returns for this
investment are fixed since the investors will get regular payments once or twice a year
until the maturity date until the owed amount is paid. It also has a higher interest rate
than savings deposits.

3. Mutual funds – this allows investors to acquire a high number of investments in a

transaction. A mutual fund manager collects money from several investors and invests
to stocks and bonds or other forms of the asset. You can invest your money even if
you don’t have experience and time since somebody is managing it for you. When a
mutual fund from its investments in stocks and bonds earns money or increases its
value, investors will sell these for profit. You can choose from different risk levels since
this is diversified.

4. Property/Real Estate – it has been a preferred asset across several generations

because it has the potential to combat inflation. An investor can get decent returns if
he/she could acquire properties 50% off from its value. This can be used as collaterals
for loans. In this investment, capital outlay can be demanding. By pooling properties to
groups can make this reasonable for profit.

5. Commodities and collectables – are natural resources that come from the earth like
food, metal and energy that can be bought in the open market. Examples of these are
rice, wheat, oil, gas, coal and gold. Its price changes along with the supply and
demand. This is generally high risk/return investment compared to stock and bonds. It
also requires some expert information to earn big profits.

6. Bank deposits – the lowest-risk form of investment and lower returns. This is the
money placed into a bank for safekeeping. The money is placed into deposit accounts
such as current accounts, savings accounts and checking accounts. It earns fixed
interest in a specified time. The longer the time period, the greater the rate of return
and there’s a penalty for early withdrawal.

7. Insurance – this is the double investment. Your premium eventually becomes your
investment after a period of time. Your investment grows as you pay your premium.
The longer you maintain your premiums, the higher the returns. You can also diversify
and repurpose your investment for other financial ventures by just maintaining your
premium’s value.

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ADVANTAGES AND DISADVANTAGES OF EACH TYPE OF INVESTMENT
INVESTMENT
ADVANTAGES
TYPE
STOCKS • limitless upside
• fixed income based on the
BANK
interest rate and capital deposit
DEPOSITS
• short term compared to bonds
• there is a recurrent payment for
a certain time period
BONDS
• will not lose money if the bonds
are retained until maturity period
• Allows small investors access to
diversified portfolios managed
MUTUAL
FUNDS
by experts that is hard to create
with small amounts of starting
investment.
• normally borders inflation
• Negatively related to bonds and
COMMODITIES equities. (can be used for
diversification)
• barrier against geopolitical risks
• value increases over time
• can be used for diversification
REAL ESTATE • can also be a fence against
inflation
• can generate rental income
• provides cash to the insured
person/entity in times of
INSURANCE untoward financial issue
• certain tax-free provisions and
benefits
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DISADVANTAGES
• no certain returns
• the riskiest of all assets
• low interest rates compared
to bonds
• There’s a possibility that one
of the parties may fail to
deliver on the terms of a
contract.
• If bonds are not retained until
its maturity period, the
investor may gain or lose
based on the current interest
rate. if the current interest rate
is higher, investors will have
some losses in the pre-
termination.
• there is a professional fee
• fluctuating like the stock
market
• volatile and highly liquid that
must be closely monitored
• plenty of things to consider as
to the storage, transportation
and other costs
• financing is hard due to high
capital requirement
• requires property
maintenance
• illiquid
• premiums can be costly
• some insurances do not
provide benefits in certain age
• may go bankrupt
Risk and Return of Each Asset

We need to consider the risk and return of each investment when looking at these assets.
Keep in mind, the higher the risk mostly results in higher returns.

You need to consider the following:

1. Liquidity – this means how fast can you convert the asset into cash. It is advisable
that you convert your investments into a more liquid asset as you grow older.

2. Volatility – refers to how fast a price could change unpredictably and how risky as an
investment.

3. Yield – the amount of return you get from your investment

Let me do a simple comparison for you:

ASSET CLASS LIQUIDITY VOLATILITY YIELD

dependent on the
PROPERTY highly illiquid stable return
market
STOCKS generally liquid higher risk higher return
liquidity is
dependent on dependent on the
BONDS stable return
market demand market

liquidity is
dependent on
COMMODITIES higher risk high return
market demand

Liquid
BANK DEPOSITS lowest risk low
generally liquid
dependent on the
MUTUAL FUNDS higher return
type of mutual fund
generally liquid
INSURANCE lower risk fixed return

Taking consideration of how these assets differ from each other allows you to decide which
investment strategy suits best for you.

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 II. Let’s Perform & Practice
Instruction: Read and use the hints below to fill in the right answer. If filled out
appropriately, the word will perfectly fit into the crossword puzzle.
Across
4. Change Down
5. Long-term 1. AXA, PrulifeUK
6. Diversified 2. Gasoline
9. Mansion 3. Cash
10. Ownership 7. Returns
11. Property 8. Loan

III. Let’s Connect / Let’s Analyze

We have Finch Dexter, a 42-year-old head of the family, married with 3 kids. Finch Dexter
has a P50, 000.00 loan and P35, 000.00 cash set aside. If Finch passes away, his money
might be taken away by his creditors. Since he is the only one with an income, this leaves his
family to nothing to survive monetarily. Where would they get money for the expenses for his
wake and burial? His kids might also be studying and will be rundown of the needed funds for
education. Can all these problems be avoided?

State your answers and provide recommendations on a separate sheet of paper.

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IV. Let’s Answer

Instruction: Provide the letter of the correct answer.

1. It says you own a part of the corporation

A. Stocks
B. Bank Deposits
C. Insurance
D. Mutual Funds

2. The investment with the lowest return and lowest risk

A. Commodities
B. Bank Deposits
C. Insurance
D. Bonds

3. Largely considered as the highest risk and highest return.

A. Insurance
B. Property
C. Stocks
D. Bank Deposits

4. You become part of the company by

A. Being the manager of a company
B. Acquiring a company’s bonds
C. Buying stocks
D. All of the above

5. You have a greater chance of making more money by investing than saving.
Saving is riskier than investing.
A. Both sentences are correct
B. First sentence is correct and second is incorrect.
C. Both sentences are incorrect.
D. First sentence is incorrect and second is correct.

V. Let’s Explore / Let’s Create

Assume you have P900,000.00 and you want to invest your money into three types of
investment.

Do the following:
1. List down the three types of investment you chose.
2. Compare and contrast the three types of investment using a Venn Diagram.
3. Make a breakdown of the amount that will be invested in each type.
4. Identify the advantages and disadvantages of each type of investment.
5. Explain the risks inherent in each type of investment and how can you reduce it.

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Rubric
5 point 4 point 3 point 2 point 1 point
• Well written • Fairly clear. • Minimal effort. • Somewhat • Lacks effort.
and very • Good • Few unclear. • Very poor
organized. grammar. grammatical • Shows little grammar.
• Excellent • Good errors. effort. • Very
grammar. presentation • Fair • Poor unclear.
• Clear and and presentation. grammar. • Does not
concise organization. Few details. • Confusing address the
statements. • Sufficient and topic.
• Outstanding effort and incomplete • Limited
effort and detail. sentences. attempt.
presentation • Unorganized
with detail. thoughts.
• Demonstrates
a thorough
understanding
of the topic.

Writer: Evaluator:

DEXTER C. GARRIDO MAY ANN V. NABLE

Teacher II Teacher III
Daniel R. Aguinaldo National High School Daniel R. Aguinaldo National High School

Answer Key:
II.
1. Insurance 7. Yield
2. Commodities 8. Bonds
3. Bank deposits 9. Property
4. Volatility 10. Stocks
5. Investment 11. Real estate
6. Mutual funds
IV.
1. A
2. A
3. C
4. D
5. B

References:

1. O’Shea, A, (2020) Type of Investments. Retrieved from

https://www.nerdwallet.com/article/investing/types-of-investments
2. Braun, E & Donavan S. (2017) Fun with Finance: Classroom Activities for Financial
Literacy Month. Retrieved from
https://freespiritpublishingblog.com/2017/03/30/fun-with-finance-classroom-
activities-for-financial-literacy-month/
3. Tolani, S.R. (2020) Financial Planning Book. Dr. Sanjay Tolani Publishing