Senior High School

Business Finance
Module 9 :

AIRs - LM
LU_ Business Finance_Module 9
Different Types of Investment s

LU_ Business Finance_Module 9

ABM – BUSINESS FINANCE
Module 9: Different Types of Investments
Second Edition, 2021

Copyright © 2021
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form without written
permission from the copyright owners.

Development Team of the Module

Authors: Geneises P. Villanueva

Mary Ann D. Cacayuran
Editor: SDO La Union, Learning Resource Quality Assurance Team
Content Reviewer: Clarita C. Montemayor
Language Reviewer: Ronald June Balsomo
Illustrator: Ernesto F. Ramos, Jr., P II
Design and Lay-out: Angela Pauline C. Ganuelas

Management Team:

Atty. Donato D. Balderas Jr.

Schools Division Superintendent
Vivian Luz S. Pagatpatan, Ph.D
Assistant Schools Division Superintendent
German E. Flora, Ph.D, CID Chief
Virgilio C. Boado, Ph.D, EPS in Charge of LRMS
Lorna O. Gaspar, EPS in Charge of ABM
Michael Jason D. Morales, PDO II
Claire P. Toluyen, Librarian II

Printed in the Philippines by: _________________________

Department of Education – SDO La Union

Office Address: Flores St. Catbangen, San Fernando City, La Union
Telefax: 072 – 205 – 0046
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LU_ Business Finance_Module 9

 Senior High School

Business Finance
Module 9:
Different Types of Investments

LU_ Business Finance_Module 9

Introductory Message
This Self-Learning Module (SLM) is prepared so that you, our dear
learners, can continue your studies and learn while at home. Activities,
questions, directions, exercises, and discussions are carefully stated for you
to understand each lesson.

Each SLM is composed of different parts. Each part shall guide you
step-by-step as you discover and understand the lesson prepared for you.

Pre-tests are provided to measure your prior knowledge on lessons in

each SLM. This will tell you if you need to proceed on completing this
module or if you need to ask your facilitator or your teacher’s assistance for
better understanding of the lesson. At the end of each module, you need to
answer the post-test to self-check your learning. Answer keys are provided
for each activity and test. We trust that you will be honest in using these.

In addition to the material in the main text, Notes to the Teacher are
also provided to our facilitators and parents for strategies and reminders on
how they can best help you on your home-based learning.

Please use this module with care. Do not put unnecessary marks on
any part of this SLM. Use a separate sheet of paper in answering the
exercises and tests. And read the instructions carefully before performing
each task.

If you have any questions in using this SLM or any difficulty in

answering the tasks in this module, do not hesitate to consult your teacher
or facilitator.

Thank you.

LU_ Business Finance_Module 9

Target
All of us wanted to have a good future. Receiving more money later is the
reason for us to what we called investment. When you invest, you are committing
money or another in the expectation of some future benefit. A college education, for
example, can be considered as an investment because you invest your time (a
resource) in hopes of earning a degree and a good job after graduating (the future
benefit).

An understanding of the basic features of various investment instruments is

required before an individual creates his own portfolio of assets. This involves
analyzing the risk and return characteristics of this assets and investments
including its types which will be tackled in this module.

This module will provide you with necessary information and understanding
of the different types of investment.

After going through this module, you are expected to attain the following
objectives:

Learning Competency:
• Compare and contrast the different types of investments. (ABM_BF12-
IVmn-23)

Subtasks:
1. Define investment
2. Identify the different types of investment
3. Differentiate each types of investment according to its risks and returns.

Before going on, check how much you know about this topic. Answer the Pre-test
on the next page.

LU_ Business Finance_Module 9

 Jumpstart

Activity 1: TRUE or FALSE

Directions: Read and understand each statement carefully. Write TRUE if
the statement is true or FALSE if the statement is incorrect. Use a separate
sheet of paper for your answers.

_______1. There are four main types of investment.

_______2. Funds can fall in the three types of investment.
_______3. Stocks are also known as an equity or share.
_______4. Lending investment is the most volatile and profitable class of
investment.
_______5. Precious metal and art collectibles are called investment if the intention is
to resell them for a profit.
_______6. In investing we must know who the issuer of the investment.
_______7. Lending investment has higher risk than owner investment.
_______8. Real state is considered to be an ownership investment.
_______9. Bonds, Treasury Bonds and Cash Deposits are examples of lending
Investment.
______10. Cash Equivalents are investments which can easily be converted to cash.

LU_ Business Finance_Module 9

 Discover

Investment
• Commitment of money that is expected to generate additional money.
• It is the application of money or other assets in the hope that in the future it
would appreciate or generate more income.

Why do individuals invest?

• To achieve a higher level of consumption in the future by forgoing
consumption today.
• To improve our welfare in the future.
• Investments help us achieve tradeoff between current consumption and
future consumption.

The different types of investments will be grouped into three:

1. Fixed income and Equities
2. Alternatives to fixed income and equities
3. Other investment assets

1. Fixed Income and Equities

Investment Type Advantages Disadvantages

“Give small investors • Pay management fees
Mutual funds access to professionally • Values can also
managed, diversified fluctuate just like the
“An investment that is portfolios of equities, stock market
made up of a pool of bonds and other
funds collected from securities, which would
many investors for the be quite difficult (if not
purpose of investing in impossible) to create with
stocks, bonds, and a small amount of
similar assets” capital”
Unit Investment Trust • Same as mutual funds. No shareholder rights for
Fund (UITF) • Easier access because investors such as
clients can open an dividends and voting
Similar to a mutual fund rights.
account in any branch
but is managed by
banks. of the bank near them.
• No entry and
management fees.

LU_ Business Finance_Module 9

4

LU_ Business Finance_Module 9

2. Alternatives to fixed income and equities

Investment Type Advantages Disadvantages

• Unlimited Upside • No guaranteed returns.

Stocks (Equity)
• Riskiest of all assets (can
lose even more than 50% of
“Type of security that
their money in one day)
signifies ownership in a
corporation and
represents a claim on
part of the corporation's
assets and earnings”

Bank Deposits (Fixed • Known income • Lower interest income vs.

Income) based on bonds
“Money placed into a outstanding • Settlement risk if the bank
banking institution for principal and closes
safekeeping” current interest
rate
• Shorter, if any,
holding period vs.
bonds
• Known periodic
Bonds (Fixed income) • If not held until maturity and
payments for a
pre-terminated, investor can
“Debt investments where certain period of gain or lose depending on
an investor loans money time the prevailing interest rates
to an entity which • Can’t lose money if at the time of
borrows the funds for a bond investment is pretermination. If interest
defined period of time at held until maturity rates are higher, investor in
a variable or commonly, bonds can lose in the
fixed interest rate” pretermination.

LU_ Business Finance_Module 9

3. Other investment assets

Investment Type Advantages Disadvantages

Currencies • Largest market in the world • Volatile and trades 24

in terms of trading volume, hours a day
“Generally accepted form of so much liquidity (must be closely monitored)
money, including coins and • Generally uses margin
• Unlike stocks, commodities,
paper notes, which is etc., currency asset itself is trading which allows clients
issued a medium of exchange which to bet more than their capital
by a government and people can use to transact (may also be an advantage)
circulated within an
economy” (i.e. USD, EUR,
JPY)
• Natural hedge against • Same as currencies
Commodities
inflation • Impractical to invest
• Negatively correlated with directly considering storage,
“A basic good used in
transportation and insurance
commerce that is equities and bonds (may be
used for diversification) costs involved
interchangeable with other
commodities of the same • Hedge against geopolitical
type” (i.e. gold, nickel, oil) risks
Real Estate • Generally appreciates over • Huge capital
time because land gets needed,
“Land and any scarce financing can be difficult
improvements on it” (i.e. • Maintenance of the
land, house and lot, • Have relatively
property needed to preserve
condominiums) low
its value
correlations with other asset • Illiquid or difficult to
classes (may be used for sell
diversification)
• Can be a source of recurring
rental income
• May also be a hedge against
inflation because of
inflationlinked rent
escalation
clauses
Insurance • Gives the insured • Insurance premiums may
individual/entity the be costly
“A contract (policy) in which cash/capital to deal with • On some of traditional
an individual or entity unforeseen adverse financial
insurance plans, no
receives financial protection
consequences sickness/death until a
or reimbursement against
•
losses from an insurance May provide certain tax certain age may mean not
company” (i.e. life benefits (i.e. tax deductibility, getting any benefits at all
insurance, educational tax-free provisions) (that’s why VUL’s are now
plans, VUL) very prevalent)
• Some insurance companies

LU_ Business Finance_Module 9

 can go bankrupt (i.e.
College Assurance Plan) if
companies fail to factor
significantly adverse
unforeseen circumstances

Explore

Activity 2:
Directions: Read and understand each statement carefully. Identify the type
of investment of the following. Use a separate sheet of paper for your
answers.

____________________1. Land

____________________2. Life insurance

____________________3. Gold

____________________4. Educational plans

____________________5. Oil

____________________6. VUL

____________________7. House and Lot

____________________8. Philippine peso

____________________9. US Dollar

___________________10. Nickel

LU_ Business Finance_Module 9

8

LU_ Business Finance_Module 9

 Deepen

Activity 3:
Directions: Read and understand each question carefully. Use a separate
sheet of paper for your answers. Your task will be graded base from the
following rubric:
5 points= the answer is complete
4 points = the answer is missing slight details
3 points = the answer is missing multiple details;
2 points = content suggests a lack of preparation or comprehension 1
point = content only marginally related to the question / prompt
1. How do mutual funds differ from UITFs?
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

2. Why would a risk-averse (likes to avoid risks) type of investor prefer

fixed income over equities?
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

• Arthur S. Cayanan; Daniel Vincent H,. Borja (2017), Business Finance, (pp.
134-136). Manila, Philippines. Rex Book Store, Inc.

9
LU_ Business Finance_Module 9
 • Commission on Higher Education, (2016), Teaching Guide for Senior High
School - Business Finance, (pp.316-320), , 4th Floor, Commission on Higher
Education, C.P. Garcia Ave., Diliman , Quezon City, Commission on Higher,
K to 12 Transition Program Management Unit

LINK

• Investment Retrieved September 27, 2020

https://www.investopedia.com/articles/younginvestigators/10/what -
isinvestment.asp

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LU_ Business Finance_Module 9
 For inquiries or feedback, please write or call:

Department of Education – SDO La Union

Curriculum Implementation Division
Learning Resource Management Section
Flores St. Catbangen, San Fernando City La Union 2500
Telephone: (072) 607 - 8127
Telefax: (072) 205 - 0046
Email Address:
launion@deped.gov.ph
lrm.launion@deped.gov.ph

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LU_ Business Finance_Module 9