Porfolio Guide in investment management An undergraduate course requirement in management 107

submitted by: Virgilio

f Montilla Jr

A BSAB IV , student of the College of Agriculture, WPU, Aborlan, Palawan

submitted to:

Dr Lourdes s Arcilla

The Dean of the College of Business Economics and Management, WPU, Aborlan, Palawan

List of topics

Savings and Time Deposit

What are saving accounts?
Savings accounts are accounts maintained by retail financial institutions that pay interests but cannot be used directly as money. Savings accounts are generally for money that you dont intend to use for daily expenses.

Important features to be consider before opening a savings account: Interest rate

The rate of interest is one of the most important features of a savings account. You need to gather information about the annual percentage yield of various savings packages and then compare the banks that offer higher interest rate.

ATM cards:
It is valuable to confirm whether the savings account come with ATM card, which allows you to withdraw money from the ATM of your bank

Service and facilities:

The service and facilities are more critical features of a savings account, which you need to confirm. Some banks offer online banksing service, which lets you use your computer acces your account

Prevention of overdrafts
Prevention of overdraft is in fact the most beneficial feature of savings account. Types of savings account Regular savings account The most common type of savings account and the simplest way to duse

CDs (certificate of deposit) CDs offer the biggest interest rates among savings accounts. Interest is made by putting your savings for a pre determined time.

What are the Time deposit?

A deposit at a bank or financial institution that has a fixed returned and a set maturity. Types of Time Deposit Traditional CDs The money is invested for a predetermined amount of time at predetermined interest rate. Liquid CDs Liquid CDs are locked in at rate but the owners are able to initially withdraw money at any time without a penalty Brokered CD Brokered CDs are bought by a broker from a bank and the resold to the brokers costumer. Deposit products Peso checking account Regular checking account Smart checking account Peso checking account payroll

Other deposit products Peso savings account Automatic transfer facility Dollar savings account Third currency savings account Peso term account Dollar term account

What is savings deposit? savings deposits are standard savings accounts or passbook accounts offered by traditional commercial banks, savings and loan associations and mutual savings

Meaning and types of banks

Commercial banks Industrial banks Agricultural bank Exchange banks THE TEASURY BILLS, NOTE AND BONDS
What are treasury bills, note and bonds Treasury bills, note and bonds are sold by the Treasury Department. these are the safest investment in the world, since they are backed by the U.S Government. Since they are so safe, tend the lowest interest rate. The difference between bills, notes and bonds are length until maturity

Treasury bills are issued for terms less than a year Treasury notes are issued in terms of 2,3,5 and 10years

Treasury bonds are issued in terms of 30 years, and were reintroduced in February 2006. Treasury Bill T-Bill Treasury Bills (T-Bill are peso denominated bills with a maximum, term of 365 days.

What does bill announcement mean? an announcements published by the U.S treasury regarding the next bill auction. TREASURY NOTES A marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years. treasury notes can be bought either directly from the U.s. Government or through a bank. 10 YEARS NOTE
Treasury notes bear a stated interest rate, and owner receives semi annual interest payments. Treasury bills are short term obligations with a term of year at less and Treasury bonds have a term of greater than 10 years.

WHAT IS BOND?
Bonds are another word for loans taken out by large organization, such us corporations, cities, and the U.S. Government.

Why Invest in Bonds?

Manypersonalfinancialadvisorsrecommendthatinvestorsmaintainadiversifiedinvestment portfolioconsistingofbonds,stocksandcashinvaryingpercentages,dependingupon individualcircumstancesandobjectives.Whateveryourinvestmentgoals,yourinvestment advisorcanhelpexplaintheinvestmentoptionsavailable,takingintoaccountyourincome needsandtoleranceforrisk.

How To Invest
Thereareseveralwaystoinvestinbonds,includingpurchasingindividualbondsorinvestingin bondfundsorunitinvestmenttrusts.

DIFFERENT TYPES OF BONDS

 Savings Bonds I Bonds Municipal Bonds Corporate Bonds Junk Bonds Bond Equity Earnings Yield Ratio BEER
a metric used to evaluate the relationship between bonds yields and earnings yields in the stock market.

Land
The solid part of the surface of the earth; -- opposed to water as constituting a part of such surface, especially to oceans and seas; as, to sight land after a long voyage.

Residential area
A residential area is a land use in which housing predominates, as opposed to industrial andcommercial areas. Housing may vary significantly between, and through, residential areas. These include single family housing, multi-family residential, or mobile homes. Zoning for residential use may permit some services or work opportunities or may totally exclude business and industry. It may permit high density land use or only permit low density uses. Residential zoning usually includes a smaller FAR (floor area ratio) than business, commercial or industrial/manufacturing zoning. The area may be large or small.

Advantanges of Investing in Residential Property

Expenses, including depreciation on the property and interest on your borrowings, are tax deductible. You make money as the value of the property increases. You can leverage your investment.

You get rental income. For people who can't save, paying off a mortgage is an enforced savings programme.

Risks of Investing in Residential Property

Interest rates could rise. The property could be untenanted for a period of time. You could get "bad" tenants. It could take up a lot of your personal time. House prices could remain static, or even fall.

POINTS TO BE CONSIDERED BEFORE INVESTING RESIDENTIAL PROPERTY Below 5 little print that you just ought to place confidence in whereas buying a property; Identify your Needs: Before you purchase any property you would like to try to your home work initial. Verify your basic demand whereas buying a property or flats for sale in Mumbai. If you are aiming to keep in flat then what range loved one goes to live there, what have to be compelled to be the sq. feet (or total area) you will need Choose wonderful Place: whereas buying a property its necessary to determine on right place. It has to be compelled to be remote from station since Railway is lifeline of Mumbai. Hospital, Schools, Bank, faculties and various necessary areas have to be compelled to be with reference to the position. Inform prefer right society or area thats sweet and friendly

Verify the Documents: This could be most important, you want to ensure that you just will get all access and detailed information of your possession and connected documents. Ensure that your flats building has taken approval from native Municipal Corporation. Additionally guarantee whether or not or not the building is built on legal land or not. Ask Agents: Agents are one who having best info of properties. Inform contact to a reliable and renowned agent who will not solely assist you to go looking out your dream home but additionally offer some discount moreover. They have vast info of assorted location of the city where upcoming comes are in progress. They are also having knowledge of Mumbai ResIdential Apartments for rent in prime locations. Must Visit the Site: Dont merely purchase the property whereas not seeing the flat yourself. Check all rooms, kitchen rest room and locality moreover. If its in below development then you will request developer to make some very little changes as per your desires moreover. Advantages A buy and hold strategy can offer several advantages to the knowledgeable investor. If the home is allowed to appreciate for long enough, the investor can generally expect a higher rate of return on their money than they would see with other investments. In

addition, tenants actually end up paying the expenses and build equity for the owner on the home through rent, and this can provide the investor with a positive cash flow. The right tenant can also offer the benefit of watching over the property. Disadvantages Of course, there are also disadvantages to a buy and hold strategy. For one thing, this requires a great deal of patience as it might take years to see a return on the investment from appreciation. Plus, the investment cannot be easily liquidated. Other disadvantages include the cost of renovations, managing the property when tenants are unreliable, and being at the mercy of real estate cycles. The reality is there will be no profit if the investor is forced to sell when the market is low so always employ a positive cash flow situation or pass on the deal.

Agricultural Land.
In the broadest sense 'agricultural land' means land suitable,available or being used used for agriculture. "agricultural land" land which means before development permitted by thisPart is carried out, is land in use for agriculture and which is so used forthe purposes of a trade or business, and excludes any dwelling house or garden;

Things to Consider Before Buying Agricultural Land

Conduct a Research for the Location
For making your land investment profitable, you have to face the challenge of choosing a very good location for your land. In order to get the best location, an extensive research needs to be conducted by actually visiting the region where you wish to buy the land. Through careful observation, you can choose a plot of land which is available cheap and will fetch you a great price appreciation in the time to come.

Check for Essential Facilities

While making any kind of land investment, you should check whether the area around has essential facilities such as water supply, power supply, health care facilities and many other things. The absence of these things in the vicinity can create problems for you and the land would not be much

in demand in the future. You can take help from real estate attorneys and realtors in this regard as they have spent a long time in the industry and know the current trends and happenings well.

Decide the Purpose of Investment

Are you investing in the plot of land just to sell it off at a higher price after a few years or you wish to construct commercial or residential building there? This is the question which you should ask yourself before making any kind of land investment. To erect a building, you will need several clearances and the land should be non agricultural for that. Also, you will have to get your plans approved in order to utilize it for a construction project. At this time, you should also be aware of the land investment tax benefits which you can definitely get after this deal.

Check the Land Surface

Apart from conducting a market research, checking the land surface is also a must while making any kind of land investment. Many experts will suggest you to refrain from purchasing marshy lands or the ones located in low lying areas. The land on hill slopes should not be purchased as it can cause a lot of difficulty in the construction activities. Ideally, that kind of land should be given preference which has underground wells which can fulfill your need for water. This is one of the most important point to remember while we discuss how to buy land.

Check the Price of the Land

While making a land investment, it is necessary to conduct a reality check on the price of the land in the area where you wish to make a purchase. You should see to it that the land owner is not selling the land at a higher price than the ongoing prices. If this point is neglected, then you will be at a big loss. At the same time, you need to think whether you would be able to pay the amount for the piece of land and how much real estate loan you will require for the same.

Complete the Legal Formalities

While buying land, you should ensure that you are actually getting the total area which was promised to you by the seller. The legal documents should be with you once you pay for the land. The property should be of a clear title so that you do not face difficulties for applying for loans to buy it and sell it whenever you want. Land contract should be signed between you and the seller and you must know how does a land contract work.

Commercial property
The term commercial property (also called investment or income property) refers to buildings or land intended to generate a profit, either from capital gain or rental income. Commercial property includes office buildings, industrial property, medical centers, hotels, malls, retail stores, shopping centers, farm land, multifamily housing buildings, warehouses, and garages. In many states, residential property containing more than a certain number of units qualifies as commercial property for borrowing and tax purposes.

Commercial property can be a good investment. It provides a predictable, steady stream of income and has potential to grow in value. Over the long term, itsreturns have been competitive with those of equities and bonds, and it can also help to diversify a portfolio

Top tips for investing in an emerging commercial market

1. Know your goals 2. Restrategise and regroup 3. Reduce your personal debt 4. Pay down your owner-occupied residence 5. Research & know the market 6. Understand the cycle 7. Look for opportunities

The benefits of investing in commercial property

Leases tend to be much longer anything from three to 20 years - and they are quite often secured by bank guarantees. Commercial tenants will also tend to maintain the property better as the look and condition of the property is important to their business and their staff. But many comm ercial leases also have added protection for the owner in the form of make good clauses, maintenance clauses and management clauses. The return on invested capital on commercial properties ranges between 7% and 10% net after all costs*. Residential property investors must pay all outgoings and other costs, although of course this can be negatively geared. Deductible rates on commercial property, though, are higher than for residential because of higher depreciation rates.

Why Commercial Property?

Compared to residential property investments, commercial property offers some key advantages: Long-Term Secure Cashflow - Commercial lets normally have long lease contracts, with periods of 10 years and more not being uncommon. In addition to this, commercial property tenants are less likely to default on payments and even if the tenant goes into liquidation, the liquidator may continue paying the rent in order to stop the lease being forfeited. Maintenance - Commercial tenants are generally liable for the maintenance and upkeep of the property, contrasting with residential leasing, where the onus tends to be on the landlord Income Yield - Commercial property tends to deliver a relatively high income yield throughout the rental period. In comparison residential property investors rely on the capital value of the house increasing to generate a good return. This is fine during periods of rising property prices, but less beneficial during property slumps.

Commercial Property Risks

In line with all investments, commercial property investment comes with its own risks: Poor Liquidity - Compared to equities and bonds, property has poor liquidity, both in the time spent finding a buyer and making the transaction. This can be further emphasised in poor market conditions when the ability to find a buyer offering the right price will become very difficult. Poor Diversification - The more diverse an investment portfolio, the less susceptible it will be to tough market conditions. Investing in a single property can be a risky challenge. Market Performance - The property market is prone to cycles, as yields grow and decline depending on the level of supply and demand for commercial property. Current rental rates could decline in the future. Sector Performance - A decline in the sector that your property services could affect your investment. For example a period of poor sales performance and market withdrawal in the retail sector could lead to the demand for small store, supermarket, department store and warehouse property to decline sharply.

What To Look For When Buying Commercial Property

Location - the location of the property is very important and will be a major factor in determining the value of property and rental income. Easy access to transport networks is an obvious plus factor for most tenants, but consideration should also be given to future developments in the area. For example, the development of a new supermarket, might depreciate the value of small shops. Type Of Building - The requirements of tenants can change over time, with implications on the type of building they need. For example the move to open plan office space, could make older buildings with their rigid enclosed spaces redundant. Many companies also look for facilities like air conditioning and the ability to connect computer terminals through under floor wiring. Tenant Quality - Properties whose tenants are reliable, present a low credit risk and hold a longterm lease will hold a premium value. Market Factors - Try to identify which sectors and sub-sectors of the market will perform well in the future. The same can be said for geographic regions, which might receive future government or multi-national investment

Real estate
Real estate is the modern term for land and anything that is permanently affixed to it. Fixtures include buildings, fences, and things attached to buildings, such as plumbing, heating, and light fixtures. Property that is not affixed is regarded as personal property. For example, furniture and draperies are items of personal property. Personal versus private property In political/economic theory, notably socialist and anarchist philosophies, the distinction between private and personal property is extremely important. They are separated by a sometimes blurry boundary; which items of property constitute which is open to debate.

Personal property is part of your person and includes property from which you have the right to exclude others (e.g., televisions, cars, clothes, etc Private property is a social relationship, not a relationship between person and thing according to Marx (e.g., factories, mines, dams, infrastructure, etc.). In capitalism there is no distinction between personal and private property To many socialists, the term private property refers to capital or the means of production, while personal property refers to consumer and non-capital goods and services.

Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate Personal property may be classified in a variety of ways. Possession Possession is a property interest under which an individual is able to exercise power over something to the exclusion of all others. It is a basic property right that entitles the possessor to (1) the right to continue peaceful possession against everyone except someone having a superior right; (2) the right to recover a chattel that has been wrongfully taken; and (3) the right to recover damages against wrongdoers. In order to constitute possession, there must be a degree of actual control over the object, coupled with the intent to possess and exclude others.

The law recognizes two basic types of possession: actual and constructive. Actual possession exists when an individual knowingly has direct physical control over an object at a given time. For example, an individual wearing a particular piece of valuable jewelry has actual possession of it. Constructive possession is the power and intent of an individual to control a particular item, even though

it is not physically in that person's control. For example, an individual who has the key to a bank safe deposit box, which contains a valuable piece of jewelry that she owns, is said to be in constructive possession of the jewelry. Investment has different meanings in finance and economics. In Finance investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security of principle, as well as security of return, within an expected period of time In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling.

In finance In finance, investment is the commitment of funds through collateralized lending, or making a deposit into a secured institution.. Linguistic significance Common usage of "investment" to describe "speculation" has reduced investor capacity to discern investment from speculation, reduced investor awareness of risk associated with speculation, increased capital available to speculation, and decreased capital available to investment. Real estate as the instrument of investment In real estate, money used to purchase property for the purpose of holding, reselling or leasing for income, has significant risk and is not an investment. See Real Estate Speculating Residential real estate The legal arrangement for the right to occupy a dwelling in some countries is known as the housing tenure. Types of housing tenure include owner occupancy, Tenancy, housing cooperative, condominiums (individually parceled properties in a single building), public housing, squatting, and cohousing. The occupants of a residence constitute a household. Residences can be classified by, if, and how they are connected to neighboring residences and land. Different types of housing tenure can be used for the same physical type. For example, connected residents might be owned by a single entity and leased out, or owned separately with an agreement covering the relationship between units and common areas and concerns.

Major categories

Attached / multi-unit dwellings

Apartment - An individual unit in a multi-unit building. The boundaries of the apartment are generally defined by a perimeter of locked or lockable doors. Often seen in multi-story apartment buildings. Advantages: Apartment units are usually not too large, so the time and energy needed to clean the room is not too much. They are also not bothered to take care of parks, sewage facilities, water, or air circulation because there is already responsible for managing it. Disadvantages: Besides the advantages of the apartment, there are also deficiencies in an apartment you need to know. For example the cost of maintenance (maintenance fee) or services charge to be paid every month. This fee is to pay for electricity usage in public places, elevators, cleaning public places, the cost of security, cleanliness, and others. This fee is usually calculated per square meter of apartment units owned. Townhouse- is one of a row of homes sharing common walls. Differing from condominiums, townhouse ownership does include individual ownership of the land. There can also be common elements, such as a central courtyard, that would have shared ownership. Advantages of townhouse living: Lower Maintenance -Having little to no yard offers some serious advantages in the maintenance department. Many townhomes have just enough front and back yard to allow the owner to enjoy adding their own touch to the landscape, while providing those without green thumbs a simple, inexpensive yard to deal with if they want to pay a local company to do it for them. Better Security -Proximity to other homes and neighbors makes it more difficult for criminals to sneak around the neighborhood and break into homes. Street lights in many townhome neighborhoods add to the feeling of security and further hamper any illegal activity. Amenities -Many townhome communities offer pools, fitness centers, tennis courts and boat docks, similar to condo communities. In northern VA many you will find many developments where townhouses are mixed in with single family homes, sharing the same amenities. While the cost of maintaining these facilities is shared by all in the form of a HOA (Homeowners Association) fee, it could still save you some money over joining a private club if you purchase outside of an HOA. Less Noise - Anyone who has ever lived in an apartment or condo and had neighbors above and below knows its a plus not to have people walking around over your head or blasting loud music or movies downstairs. Disadvantages of townhome living: Home Owners Association - Most newer homes in the Dulles corridor are overseen by an HOA, and there are advantages and disadvantages of living in one of these developments. For those who want to park a boat in front of their house, paint their doors purple and the front of the house pink, or work on their car out front it could be a problem. Persons living under a Home Owners Association give up some personal freedoms for the good of the overall community.

Stairs -An inherent feature of townhouses is multiple floors, which means stairs, and sometimes a LOT of stairs. Some large townhouses solve this problem with elevators. Less Privacy -Since townhouses are connected to at least one neighbor, and will have more neighbors in a smaller area than a single-family home, a townhouse will generally offer less privacy as a single family home (but more so than a condo).
o

Condominium - Building or complex, similar to apartments, owned by individuals. Common grounds and common areas within the complex are owned and shared jointly. There are townhouse or rowhouse style condominiums as well.

Advantages of a condominium? Cheaper - Condos are usually cheaper than a comparable stand alone single family property. If you wanted a 2,000 square foot home, you would most likely pay 20-30% less if you bought a condo. Disadvantage? Well, your neighbors are usually really close, like as in, a walls thickness away. Depending on how well built the condo is, this may or may not affect you. Some condos you may hear your neighbors, others are built sound proof, and having close neighbors won't affect your noise level at all. Less Maintenance - The best advantage of owning a condo is having a almost maintenance free property. Most condos are maintained on the outside, which means no more shoveling snow, mowing the lawns, and repairing things like siding or shingles. Disadvantage? There is usually a Homeowners Association fee (HOA) that you are required to pay. Most HOA fees are reasonable, and are there to keep your property managers paid to keep the maintenance activities well maintained. These fees can be anywhere from $50 to a couple hundred dollars a month. It all depends on what has to be maintained. Common Areas - Most condominiums come with the added benefit of swimming pools, tennis courts, a small park, kids playground, workout centers, or many other amenities. The cost to maintain these amenities yourself could be enormous, but they are usually included in your HOA fees. Disadvantage? I can't think of many, other than the HOA fee, who doesn't like a pool? This is probably one of the major benefits of living in a condominium; the cost of owning one of these amenities in a standalone environment can be costly to say the least. Safer - There are a lot of condo complexes that have gated communities, or other security measures to keep you safe. In larger cities, you may have to push a button to be let into the complex; this is a great way to be safe. You also have a lot more neighbors that are closer, and will be more adept to watching the premise, which is good if you are going on vacation. Disadvantages There are disadvantages to owning a condo, one of which is the proximity of your neighbors. Most condos are built with a common wall, which means you will be sharing at least one wall with a neighbor, if not more, and this could prove to a be a noisy environment. Another disadvantage would be parking; most condos come with limited parking as you have to share the space with your neighbors. You may also not be able to park close to roads, or on roads, which

increases the limits involved with parking.

Multi-family house - Often seen in multi-story detached buildings, where each floor is a separate apartment or unit.

Cooperative (a.k.a. "co-op) - A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Semi-detached dwellings o Duplex - Two units with one shared wall. Single-family detached home o Mobile homes - Potentially a full-time residence which can be (might not in practice be) movable on wheels. o Houseboats - A floating home o Tents - Usually very temporary, with roof and walls consisting only of fabric-like material.

Non-residential uses Condominium ownership is also used, albeit less frequently, for non-residential land uses: offices, hotel rooms, retail shops, group housing facilities (retirement homes or dormitories), and storage. The legal structure is the same, and many of the benefits are similar; for instance, a nonprofit corporation may face a lower tax liability in an office condominium than in an office rented from a taxable, for-profit company. However, the frequent turnover of commercial land uses in particular can make the inflexibility of condominium arrangements problematic.

STOCK What is Stock? A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types of stock: Common and Preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends.

Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated. Also known as "shares" or "equity".

Types of Stock
a. Blue-Chip Stocks
Stock of a well-established and financially sound company that has

demonstrated its ability to pay dividends in both good and bad times. b. Income Stocks

An equity security that pays regular, often steadily increasing dividends, and offers a high yield that may generate the majority of overall returns. While there is no specific breakpoint for classification, most income stocks have lower levels of volatility than the overall stock market, and offer higher-than-market dividend yields. Income stocks may have limited future growth options, thereby requiring a lower level of ongoing capital investment. The excess cash flow from profits can therefore be directed back toward investors on a regular basis.

c. Growth Stocks
Shares in a company whose earnings are expected to grow at an above-

average rate relative to the market. Also known as a "glamour stock".

Types of Mutual Funds

1.Stock Mutual Funds Stock mutual funds or equity funds invest primarily in shares of stock issued by Philippine corporations. The dominance of stock issues within the portfolio positions the fund to attain a more aggressive rate of growth. 2. Balanced Mutual Funds balanced funds invest in both shares of stocks and bonds, thereby accessing the growth potential of stocks tempered with the presence of secure fixed-income instruments Advantages of Investing in Mutual Funds: 1. Professional management your mutual fund manager does all the research, selection and monitoring of investments 2. Diversification mutual fund investments are spread across a wide range of companies and industry sectors which lowers your risk if a company or sector performs badly. 3. Affordable mutual funds require relatively low initial investments, in fact, some mutual fund companies are only requires P5,000 to start. 4. Liquidity mutual fund investors can redeem their shares at the current net asset value(NAV) of their investment easily and at any time. Disadvantages of Investing in Mutual Funds: Disadvantages of Investing in Mutual Funds: 1. Uncertainty of returns unlike fixed-income products (such as time deposits), your investment does not guarantee a positive return, you can lose money, this fact makes mutual funds a low to medium risk investment instrument 2. Lack of control investors cannot directly influence which securities the fund manager should invest in, thus, youre left just sitting at home and hoping that your portfolio adviser makes good investment decisions 3. Costs and fees sales commissions and redemption fees are applied to your investment if you decide to redeem your mutual fund investment, this could significantly affect your expected returns 4.Investment horizon mutual funds are not get rich quick schemes, its a medium to long term investment, people who have earned significantly in mutual funds have been in it for several years already