Basic Investment and Banking

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HONING THEAPPETITE FOR TAKING

RISKSBASIC INVESTMENT

AND BANKING


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I. Introduction

A. One of the resources considered critical is MONEY.B. What is ITS significance?

1. A medium of Exchange2. A Store of Value3. Denomination in terms of amounts by

COINS & BILLS

4. General Acceptability in ALL its purposeand intent5. Love for money is the root of all evils.


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C. Money is also a FUND.1. Money begets money2. It buys and sells

3. It generatesrevenues/sales/receipts

4. It incurs costs/expenses/losses5. It earns Profits


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D. Money is the subject crucial to1. Income Salaries and Wages2. Consumption Spending and

Credit Charges3. Saving Deposits and Hoarding4. Loans Borrowings and Financing

5. Investment Equity and leverage


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E. Money as basis of Management1. Thrift and abstinence

2. Financial prudence3. Capitalization4. Asset acquisition

5. Investment Decisions


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II. BANKING SERVICES TO BE AVAILED OF

A. DEPOSITS Saving a portion of COOP Funds1. Demand Deposit For safekeeping

withdrawable anytime thru withdrawalslips or checks(checking account)2. Time Deposit Savings within a specified

period of time

3. Interests Earnings of deposit based on anannual rate subject to withholding tax


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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 financesb. CAPITAL Assets and their convertibility to cash,

i.e. liquidityc. COLLATERAL As security, a source of repaymentin 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


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2. TERM LOANSa. IntermediateTerm Loans usually less than 3

years with monthly repayments based on a cashflow

Also include revolving Creditb. Long-Term Loans may extend to 10-years or

more and collateralized by the coops assetsincluding a profit-setting earmarked to repay theloan.


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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 byb. 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?


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B. CSA (Commonly Suggested Answers)1. Uncommitted or Excess Funds are supposed to be for

investments2. Portfolio investment

a. Dont put all your eggs in one basket

Meaning, DIVERSIFYb. Caveat Emptor investment is a commitment of funds

to a profitable venture with expectation for a fairreturn with a risk-trade-off where the investor has no

direct participation in the management of the affairs ofthe business where the money is invested.


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c. Businesses with credible reputation, stable operation and

socially responsible are worth investing ind. Timing is the essence of investment. In securities, the time-tested maxim is to buy when low; sell when high,consider also the outlook of the economy.

e. The BOD is always accountable for its investmentdecisions. Delegate the responsibility for investment to aportfolio manager with his/her tractable record ofexpertise and successful experience.

f. The accumulation of cash lying idle is useless asset.

Being proactive, idle or excess funds are productive wheninvested with calculated risks which can reap fair returnsfor the cooperative.


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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


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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


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C. BONDS Debts of the issuing corporationas instruments of indebtednessEarnings in fixed annual interest withmaturity and face valuecallability and convertibility withpremium or discount feature


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V. FINANCIAL MARKETS thru Intermediaries

A. Banks commercial and Savings : LendingB. Investment Houses underwriting issuesC. Mutual Funds Pooling of FundsD. Savings and Loan Associations Short-term financingE. Insurance Companies Re-investing

F. Money Market Funds Money placementsG. Stock Exchange Brokerages Securities TradingH. Social Security Institutions Bond issuesI. Cooperative Banks Savings and Loans

Epilogue : Your RISK TOLERANCE COMES FROM SELF-EFFICACY

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Basic Investment and Banking