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Chapter 1: Introduction of Investment, CHAPTER 2: SECURITIES MARKET,…

- - - - Sources of Systematic Risk :
        • Refers to uncertainty of the purchasing power to be received in future
      - Hedging Mechanism :
        • Construct investment portfolio carefully
        • Diversify into investment in real assets
    - - Source of Systematic Risk :
        • Refers to the possibility of loss due to fluctuations in stock prices
      - Hedging Mechanism :
        • Carefully examine history of the stocks
        • Good timing of purchase and sale of stock
        • Prepared to hod stocks for long period
    - - Sources of Systematic Risk :
        • Refers to fluctuations of interest rate that will affect the future market values and the size of future income
      - Hedging Mechanism :
        • Choose short-term fixed income
        • Hold security until maturity
  - - - Sources of Unsystematic Risk :
        • Refer to the operating condition faced by the company and how this condition affects the company operating income and dividend of payment
      - Hedging Mechanism :
        • Having good management team
        • Diversification
    - - Sources of Unsystematic Risk :
        • Refers to how firms finance their activities
      - Hedging Mechanism :
        • Carefully finance the operation of the company
- - - - Treasure Bills (T-Bills)
        
        Advantages :
        • Low risk as it normally issued by government
        • Secured of income in the form of interest payment
        • Principle payment and interest are guaranteed to be paid on time
        • Most treasury securities have low liquidity risk and can be easily be sold for cash
        
        Disadvantages :
        • Interest rates are low in comparison to other investments. As the interest rate will generally be lower than the rate of inflation, your treasury bills could actually lose value over time
        • A significant amount of money must be provided by investor to buy treasury bills as they are sold in minimum denomination of RM10,000
      - Common Stocks
        
        Advantages :
        • Better hedge against inflation
        • Expected returns are higher
        • Capital appreciation on investment
        • Ownership position in a corporation through voting rights
        • Enjoyment pre-emptive rights
        • Possibility of being elected to the BOD
        • Easily marketable at the stock exchange
        
        Disadvantages :
        • Bear the highest risk in the company
        • Possibility of not receiving residual assets of the company in case of liquidation
        • Company is not obligated to pay dividend if directors think that the company is not in the position to do so
        • Dividends do not enjoy tax shields and tax rate is high
      - Bonds
        
        Advantages :
        • Bondholders face lesser risk
        • Provide a steady stream of income for the investor in the form of interest payment
        • Bondholders have a priority claim on income and assets
        • Bond prices fluctuate according to changes in interest rates provide opportunity for capital gains to the investors
        • Bond investment could help balance the investors portfolio mix
        • Bondholders is guaranteed of receiving the principle/face value despite changes in the price/value of the bond
        
        Disadvantages :
        • Return is fixed - limited to fixed interest payment
        • Bondholders are not an owner but they are creditors to the company - do not have voting rights like common stockholders
        • Bond is not a good hedge against inflation because of the fixed return
        • Subject to call risk - firms may call certain bonds prior to its maturity, could disrupt expected cash flow and reduce rate of return
      - Preferred Stocks
        
        Advantages :
        • The preferred stocks are marketable in KLSE
        • The earnings are guaranteed in the form of fixed dividends for regular time
        • Preferred stockholders compensate the slightly greater risk they assume
        • It is less risky than common stock in case of liquidation. More risky position than corporate bondholders
        
        Disadvantages :
        • The return on preferred stocks is limited or fixed amount
        • Investors cannot participate in excess earnings
        • Investors do not have voting rights unless the company is found to be in some financial distress
  - - - Advantages :
        • Monies are saved and secured
        • Earn income in the form of interest or bonus
        • High liquid- money can be withdrawn easily
        • Money can be withdrawn conveniently at any place and time
        • By keepingmoney in Lembaga Tabung Haji (LTH), provides Muslims to have sufficient savings in performing their haj
        • Saving in LTH involved halal activities, bonus paid are tax exempted
        • Deposits can be made with a small amount of money
      - Disadvantages :
        • Earn low income since it has a low risk
        • Need high discipline from the saver due to monies are easily withdrawn even if there is no urgent need
        • Return will only received after a certain fixed period
    - - Advantages :
        • Interest earned on fixed deposits is higher than savings account
        • The account is safe
        • The risk is low
      - Disadvantages :
        • No interest earned if saving is withdrawn before the maturity period
  - - - Advantages :
        
        Options provide you the ability to use a lot of leverage. For disciplined traders who understand how to employ leverage, this is advantageous.
        
        Ratio of risk to profit. Certain tactics, such as purchasing options, provide you a limitless gain and a restricted downside.
        
        Unique tactics. Options provide you the ability to design original methods to profit from various market features, such as time decay and volatility.
        
        Little capital needs.With options, you may enter a position with a relatively little initial investment. With $1,000, one can do a lot in the options market but not so much in the stock market.
      - Disadvantages :
        
        Must possess the skills and information necessary to comprehend how options trading and investing work.
        
        There are other expenses, such commissions, that might not justify the real investments.
        
        They are a bad option for inexperienced investors because they are also difficult for beginners to understand. The majority of novices and even some seasoned investors mistakenly believe they comprehend them.
    - - Advantages :
        
        offers high rates of return, which translates into profitability because the risk is considerable.
        
        Good hedge against inflation.
        
        Invest commodities indirectly at lower risk.
      - Disadvantages :
        
        High risk & high capital.
        
        Needs expertise and knowledge.
        
        Extra time to monitor the market.
        
        Volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
        
        Leverage magnifies both gains and losses.
        
        A trade can go against you quickly and you could lose your initial deposit and more before you are able to close your position.