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HONING THE APPETITE FOR TAKING RISKS BASIC INVESTMENT AND BANKING

I. Introduction A. One of the resources considered critical is MONEY. B. What is ITS significance? 1. A medium of Exchange 2. A Store of Value 3. Denomination in terms of amounts by COINS & BILLS 4. General Acceptability in ALL its purpose and intent 5. Love for money is the root of all evils.

C. Money is also a FUND. 1. Money begets money 2. It buys and sells 3. It generates revenues/sales/receipts 4. It incurs costs/expenses/losses 5. It earns Profits

D. Money is the subject crucial to 1. Income Salaries and Wages 2. Consumption Spending and Credit Charges 3. Saving Deposits and Hoarding 4. Loans Borrowings and Financing 5. Investment Equity and leverage

E. Money as basis of Management 1. Thrift and abstinence 2. Financial prudence 3. Capitalization 4. Asset acquisition 5. Investment Decisions

II. BANKING SERVICES TO BE AVAILED OF

A. DEPOSITS Saving a portion of COOP Funds 1. Demand Deposit For safekeeping withdrawable anytime thru withdrawal slips or checks(checking account) 2. Time Deposit Savings within a specified period of time 3. Interests Earnings of deposit based on an annual rate subject to withholding tax

B. LOANS Credit facilities in the form of term loans 1. The Cs of Credit the bank looks for from a borrower: a. CHARACTER Track record of coop in managing its finances b. CAPITAL Assets and their convertibility to cash, i.e. liquidity c. COLLATERAL As security, a source of repayment in case of default resulting in foreclosure of mortgage. d. CONDITION Based on financial statements. e. CAPACITY Ability to pay with available provision for repayments, i.e. Solvency

2. TERM LOANS a. IntermediateTerm Loans usually less than 3 years with monthly repayments based on a cash flow Also include revolving Credit b. Long-Term Loans may extend to 10-years or more and collateralized by the coops assets including a profit-setting earmarked to repay the loan.

III. INVESTMENT The PASSIVE INCOME A. FAQ (Frequently Asked Questions) 1. What and how much money do you have to invest? 2. The H & Ws a. HOW to invest is answered by b. WHAT kind of investment to venture in? c. WHERE should the investment be placed? d. WHEN is the time for investment? e. WHO should be responsible for it? f. WHY must the COOP invest?

B. CSA (Commonly Suggested Answers) 1. Uncommitted or Excess Funds are supposed to be for investments 2. Portfolio investment a. Dont put all your eggs in one basket Meaning, DIVERSIFY b. Caveat Emptor investment is a commitment of funds to a profitable venture with expectation for a fair return with a risk-trade-off where the investor has no direct participation in the management of the affairs of the business where the money is invested.

c. Businesses with credible reputation, stable operation and socially responsible are worth investing in d. Timing is the essence of investment. In securities, the timetested maxim is to buy when low; sell when high, consider also the outlook of the economy. e. The BOD is always accountable for its investment decisions. Delegate the responsibility for investment to a portfolio manager with his/her tractable record of expertise and successful experience. f. The accumulation of cash lying idle is useless asset. Being proactive, idle or excess funds are productive when invested with calculated risks which can reap fair returns for the cooperative.

IV. INVESTING IN SECURITIES

A. STOCKS Equity investment Certificates of part-ownership Shares with par value Earnings in the form of dividends Voting privilege Rights of sale, transfer and succession Claims on assets and income Limited liability

B. KINDS 1. Common Stock Ordinary share With fractional share in the assets of corporation Voice in management Proportionate liability in case of liquidation Trading in the Stock Exchange Market 2. Preferred Stock hybrid security Both equity and fixed-income investment Cumulative/non-cumulative Callable and convertible Preference over common stock

C. BONDS Debts of the issuing corporation as instruments of indebtedness Earnings in fixed annual interest with maturity and face value callability and convertibility with premium or discount feature

V. FINANCIAL MARKETS thru Intermediaries


A. Banks commercial and Savings : Lending B. Investment Houses underwriting issues C. Mutual Funds Pooling of Funds D. Savings and Loan Associations Short-term financing E. Insurance Companies Re-investing F. Money Market Funds Money placements G. Stock Exchange Brokerages Securities Trading H. Social Security Institutions Bond issues I. Cooperative Banks Savings and Loans Epilogue : Your RISK TOLERANCE COMES FROM SELFEFFICACY

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