Investment 101 Workshop

Investment 101
Workshop
Section 1:
Risk Appetite and
Behavioural Finance
Risk-Return Relationship
Risk is the probability of losing some, or even all, of your initial investment.
Copyright 2005 – 2020

Star Horizon Learning Pte Ltd
Taking Calculated Risks
Likewise, we can incorporate the probability of a gain or loss in
investment.
Scenario Pay-Out Expectancy
20% Win Win = $100

Event
80% Lose Lose = $50

Taking Calculated Risks
We can expand the scenarios by having decision tree.
Scenario 1 Pay-Out Expectancy
70% Win Win = $150

30% Lose Lose = $100
Opportunity
Scenario 2 Pay-Out
70% Lose Win = $300

30% Win Lose = $100

Basic Rules to Risk Management
1. High Returns, Higher Risk
2. Know your RISK appetite
3. Looks for ways to reduce RISK

Section 2:
Investment Instruments
1. _____________________
§ Short term savings (0.05% to 0.1875% p.a.)
§ Fixed Deposit (1.5% to 1.75% p.a.)
§ Held for a fixed-term (3 months to 36 months)
§ Can withdraw before maturity but risk forfeiting all OR part of
the interest


2. __________________
§ Potentially higher return (close to 10 to 12%) but also higher
risk
§ Performance depends on the underlying assets (i.e.
performance of a basket of company shares, indices, currency
or even mortgage loan (i.e. collaterialised debt obligations)
§ Has a fixed maturity

3. _________________
§ Lending money to a government or companies
§ Bonds help lower the overall risk of your portfolio as it tends to be

less volatile
§ Junk bond (high yield bond) if BB* and below
* based on Standard and Poor’s scale
Assuming a 5 years bond pays a 6% coupon has a face
value of $1,000 is currently price at $980. What is the
Yield to Maturity?

Astrea IV and V Retail Bond

Singapore
Savings Bond
Step-Up Interest
§ 18 years old to apply; has a bank account and CDP account

§ Not tradable, no minimum holding period but redemption proceeds
will be paid out on 1st business day of the following month
§ Apply in multiples of $500 subject to a maximum of $200,000
(individual limit) Copyright 2005 – 2020
4. ________ (a.k.a Mutual Funds)
§ Investors pool money to ________ their risk
§ Appoints fund managers to manage funds (gives up control to
professionals)
§ Active Investing (must do stock-picking)
§ Beware of front-end load, switching fee, management fees
and redemption fees
§ Past performance is not indicative of future performance.

World Indices
Tokyo - ______________
Shanghai - __________
Hong Kong - __________
Sydney - ___________
Singapore -____________
London - ____________
Frankfurt - ____________

5. _________________
§ A marketable security that tracks an index, a
commodity, bonds or a basket of assets.
§ Replicates a specific index, such as stock or commodity
(Passive Investing).
§ Does not entail any forecasting, use of market timing
or stock picking skills.

Dow Jones, Nasdaq and S&P 500

6. ___________________
§ Literally represents a share to the ownership of a company
§ Money made from trading is known as ______________.
§ Money made from share of company’s profits known as
_______ .
§ Share prices are affected by news about the company and the
general economic and sector outlook

Securities Trading
The Securities Account is a check-and-balance account. It is managed by
the Central Depository (CDP).
The Trading Account sets your trading limit and allows you to place
“buy” and “sell” order and this account is managed by the securities
firms (i.e. broker).
Securities Account
(check & balance a/c)
apply
18 years old

Securities Trading

Blue Chip Investment Plan
A.K.A Regular Savings Plan

- Low brokerage fees
- Need not buy 100 shares
- Disciplined
- Custodian

Settlement
The day which your trade is executed is known as trade
day (T). Settlement of all trades takes place on a T+3
settlement cycle (T + three settlement days).
Monday (T) Tuesday Wednesday Thursday (T+3)
In other words, there is a ________ where you bought

the shares and have not paid for it.

Contra
Contra means selling the shares you purchased earlier before the
settlement date.
BUY 20 lots SELL 20 lots
of SIA of SIA
Monday (T) Tuesday Wednesday Thursday (T+3)
Date Action Inflow (+) / Outflow (-)

MON Buy 2,000 shares of SIA @ $12.00
TUE Qantas planes are grounded; SIA share price hit $13.00
WED Sold the 3,000 shares of SIA @ $12.90
Contra Gain

Short Selling
Short selling means selling shares that you don’t originally own
in hope that the shares price will fall. The position must be
covered within the same day. If not, the broker will force buy the
shares on your behalf.
Time Action Inflow (+) / Outflow (-)
9:40am Sell 10,000 shares of Lehman Brothers @ $13
3pm Rumors of Lehman collapse
5pm Buy 10,000 shares of Lehman Brothers @ $8
Profit

Short Selling
Of course, prices can work the other direction and you’ll suffer
a heavy loss.
“Abusive” Short-selling can cause panic in the market. Imagine
someone short the market with 50 million of DBS shares.
Henceforth, all transactions must be done at

arms-length.
If you are a Director / Staff / Auditor or related
parties deemed to have access to information
of the company and you short-sell, you can
be jailed for _____________.
7A. ________________
§ Your 1st property should be the HDB flat. Live in it and later
rent or sell it for a profit.
§ Buy a 2nd property, residential or commercial, and rent it out
§ Location, Location, Location

Leasehold Freehold
99 years 999 years Perpetual


7B. ____________________
§ Owns and operates income generating real estates.
§ Diversified portfolio
§ Gearing ratio limit of 45% - interest rates
§ Defensive investments (DPU)

8. __________________

9. __________________
§ Term of Whole Life
§ Endowment or Investment Linked
§ Health Insurance
§ Annuities

10. __________________
§ Usually 3 years
§ Cover death and total permanent disability only


Want to be a CPF Millionaire?

§ Forex Trading; Derivatives Trading, CFD,
Cryptocurrency
§ Social Investment Network – eToro
§ RoboAdvisor – StashAway, Autowealth, Smartly
§ Alternative Investments – Private Equity, Hedge
Funds, Commodities, Precious Metals, Wine and etc.

Section 3:
Time Value of Money
Time Value of Money
1990 2019

Time Value of Money
We use the interest to express the compensation for….

Present Value
Ø Today’s real value.
Ø We are trying to find the value today, therefore we are
___________ the future value of a dollar amount.
n
PV = FV / (1 + i)

Present Value
DBS is promising that I’ll get (a) $18,500 in 5 years or (b) $50,000 in 25
years if I deposit $15,000 today with the bank. Assuming I have an “i” of
5% p.a., which option should I take?
$18,500 $50,000
0 5 10 15 20 25
For $15,000 and 5 years horizon, I should expect __________, just so that
I’ll not be worse off.
For $15,000 and 25 years horizon, I should expect __________, just so
that I’ll not be worse off.

Investment 101 Workshop

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Copyright 2005 – 2020

Scenario Pay-Out Expectancy

20% Win Win = $100

Copyright 2005 – 2020

70% Win Win = $150

70% Lose Win = $300

Copyright 2005 – 2020

1. High Returns, Higher Risk

2. Know your RISK appetite

3. Looks for ways to reduce RISK

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2019

Copyright 2005 – 2020

§ Bonds help lower the overall risk of your portfolio as it tends to be

Copyright 2005 – 2020

Copyright 2005 – 2019

§ 18 years old to apply; has a bank account and CDP account

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

A.K.A Regular Savings Plan

Copyright 2005 – 2020

Monday (T) Tuesday Wednesday Thursday (T+3)

In other words, there is a ________ where you bought

Copyright 2005 – 2020

Monday (T) Tuesday Wednesday Thursday (T+3)

Date Action Inflow (+) / Outflow (-)

Copyright 2005 – 2020

9:40am Sell 10,000 shares of Lehman Brothers @ $13

3pm Rumors of Lehman collapse

5pm Buy 10,000 shares of Lehman Brothers @ $8

Copyright 2005 – 2020

Henceforth, all transactions must be done at

Copyright 2005 – 2020

99 years 999 years Perpetual

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

Copyright 2005 – 2020

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