1. What do we mean by investments?
It’s an area of study concerned with how investors make their decisions in securities issued by government and other organizations, how investors make their decisions in securities and other assets.
Investors are individual investors, and institutional investors ( such as Banks).
2. Is it important to study investments?
Yes, to make well informed investment decisions.
3. Why do people invest?
People invest to make money, money does not fall from heaven, they invest to accumulate wealth and to achieve certain goals, and all of us are looking for a better life.
4. What is the difference between Saving and Investment?
Saving is deferring consumption by cutting aside part of one’s income to be used in the future.
Investment is creating new productive resources.
5. Is saving not important?
No, savings are fund available to investors at banks. Some people have good investment ideas but they do not have funds to launch their investments projects. So Banks play here as an mediator that matches between people who have funds, but do not have investment opportunities, and people who do not have funds but do have investment opportunities.
6. Can we consider a depositor an investor? (the economic viewpoint) See point 10
From an economic viewpoint, Saver is someone who deposits his money at a bank. Investor is the person who borrows to invest, (the borrower).
7. We have two types of assets: Real assets, (physical or tangible assets). Financial assets which are claims such as securities.
8. Stocks and Bonds are examples of securities.
People who invest in stocks are risk-tolerant, and those who invest in bonds are conservatives.
- Stocks do not specify fixed payments, and the stockholders are called residual claimant.
- Bonds specify periodic fixed payment.
9. Stocks and Bonds are issued in the primary market by business organizations to raise capital to invest in real assets (the physical or tangible assets).
10. The financial viewpoint:
It views people who save in banks as investors.
11. Are they related, the financial and the economic viewpoints?
- The economic viewpoint refers to the direct investment in assets, while the financial refers to the indirect way of investment in assets.
- The financial viewpoint is more popular.
12. Definition of investment
- Investment is the current commitment of money or other resources in the expectation of reaping future benefits. (The text book definition)
- Professor’s Al-Badwi Explanation:
· In the popular sense, it is the purchase of an asset whether a new or outstanding, physical or financial with the purpose of earning future return. Depending on our appreciation of the asset, the return is determined.
· This return should compensate us for, at least, three factors:
1- The passage of time (deferring consumption)
2- Inflation (decreasing the purchasing power)
3- Uncertainty (risk)
13. Dr Badwi comments that investment is not a game, and one should prepare himself for gain or loss otherwise he will face health problems.
14. How can we classify financial markets?
- Primary Market: are markets where financial assets (securities) are issued for the first time.
- Secondary Market: are markets where second-hand securities can be traded.
15. Which is more important than the other?
Primary market is important for the economy because it creates new productive resources. That’s why it should be active, whereas a secondary market is also important for the existence of the primary market to make it more attractive by giving an opportunity to those who face liquidity problems to sell their securities and bring their money back.
It’s an area of study concerned with how investors make their decisions in securities issued by government and other organizations, how investors make their decisions in securities and other assets.
Investors are individual investors, and institutional investors ( such as Banks).
2. Is it important to study investments?
Yes, to make well informed investment decisions.
3. Why do people invest?
People invest to make money, money does not fall from heaven, they invest to accumulate wealth and to achieve certain goals, and all of us are looking for a better life.
4. What is the difference between Saving and Investment?
Saving is deferring consumption by cutting aside part of one’s income to be used in the future.
Investment is creating new productive resources.
5. Is saving not important?
No, savings are fund available to investors at banks. Some people have good investment ideas but they do not have funds to launch their investments projects. So Banks play here as an mediator that matches between people who have funds, but do not have investment opportunities, and people who do not have funds but do have investment opportunities.
6. Can we consider a depositor an investor? (the economic viewpoint) See point 10
From an economic viewpoint, Saver is someone who deposits his money at a bank. Investor is the person who borrows to invest, (the borrower).
7. We have two types of assets: Real assets, (physical or tangible assets). Financial assets which are claims such as securities.
8. Stocks and Bonds are examples of securities.
People who invest in stocks are risk-tolerant, and those who invest in bonds are conservatives.
- Stocks do not specify fixed payments, and the stockholders are called residual claimant.
- Bonds specify periodic fixed payment.
9. Stocks and Bonds are issued in the primary market by business organizations to raise capital to invest in real assets (the physical or tangible assets).
10. The financial viewpoint:
It views people who save in banks as investors.
11. Are they related, the financial and the economic viewpoints?
- The economic viewpoint refers to the direct investment in assets, while the financial refers to the indirect way of investment in assets.
- The financial viewpoint is more popular.
12. Definition of investment
- Investment is the current commitment of money or other resources in the expectation of reaping future benefits. (The text book definition)
- Professor’s Al-Badwi Explanation:
· In the popular sense, it is the purchase of an asset whether a new or outstanding, physical or financial with the purpose of earning future return. Depending on our appreciation of the asset, the return is determined.
· This return should compensate us for, at least, three factors:
1- The passage of time (deferring consumption)
2- Inflation (decreasing the purchasing power)
3- Uncertainty (risk)
13. Dr Badwi comments that investment is not a game, and one should prepare himself for gain or loss otherwise he will face health problems.
14. How can we classify financial markets?
- Primary Market: are markets where financial assets (securities) are issued for the first time.
- Secondary Market: are markets where second-hand securities can be traded.
15. Which is more important than the other?
Primary market is important for the economy because it creates new productive resources. That’s why it should be active, whereas a secondary market is also important for the existence of the primary market to make it more attractive by giving an opportunity to those who face liquidity problems to sell their securities and bring their money back.
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