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NATURE
AND SCOPE
Meaning
Investment can be defined in different aspects. These are:
Generally, investment is the application of money for earning more money.
also means savings or savings made through delayed consumption.
Investment
In Finance, the purchase of a financial product or other item of value with an expectation of
favorable future returns. the practice of investment refers to the buying of a financial
product or any valued item with an anticipation that positive returns will be received in the
future.
In Business, the purchase by a producer of a physical good, such as durable equipment or
inventory, in the hope of improving future business.
What is Investing?
Classification of Investment
Physical
investment
Tangible
in nature
Some
and machinery.
Some
Financial
Used
It
investment
bonds.
One can take decision only after analyzing entire process of investment
that starts with fund contribution and ends with getting expectations
fulfilled.
CONTINUED
Valuation of Securities:- Investment value is generally taken to be the
present worth to the owners of future benefits from investments. An
appropriate stet of weights have to be applied with the use of forecasted
benefits to estimate the value of investment assets.
Comparison of the value with the current market price of the asset
allows the determination of the relative attractiveness of the assets.
Portfolio Construction:-It involves the following step :
(1)Deciding the diversification level.
(2)Considering the investment timing.
(3)Selection of Investment timing.
(4)Allocation of investible funds to investment assets.
(5)Acquisition of assets.
CONTINUED
o
Investment objectives
The primary objective of investment is to increase the rate of return
and to reduce the risk. The other objectives are:
Income:-
Capital
Aggressive Growth
Speculation
Rate of Return
Return is the profit or income generated by
savings and investing.
Amoun
t of
Money
Invest
ed
Rate
of
Retur
n
Recommend refocusing
goals from saving to
investing
Risk
POTENTIAL
RETURN
RISK
Risk
Normally risk involved in investments either loss of profit or lower profit than
expected.
Speculation is a baseless guess and may result in a very high profits or high
loss. The risk in case of speculation is very high.
Capital gain
The motive of investment is achievement of appreciation.
The motive of speculation is achievement of profits through price changes.
Time
If securities are purchased and investor does not expect an immediate return on
it and waits for long term benefit, it is termed as investment.
If a person expects immediate returns on his investment and dispose of the
in a short period, it is known as speculation.
Investment tools
Stocks
Primary and secondary stock markets
Primary market: a market where newly issued securities are traded
Initial public offering (IPO): the first offering of a firms stock to the
public
Secondary market: a market where existing stocks are traded.
Bonds
Return from investing in bonds is in the form of coupon payments and price
appreciation.
Mutual Funds
Return from investing in mutual funds comes from coupon or dividend payments
generated by the portfolio of the fund.
One of the most popular is the Standard & Poors Depository Receipt (S.P.D.R,
also called Spider)
Real estate
Buying a home or purchasing rental property or land
Return from investing in real estate comes in the form of rent payments
and selling the property for a higher price than paid for it
contingencies. The investor should keep a part of his total investment in the form
of readily saleable securities.
Regularity
Stability
appreciation: The ideal growth stock is the right issue in the right
industry bought at the right time. The investor should try and forecast which
securities will appreciate in future.
Tax
benefits: The investor should plan their investment in such a way that the
Legality: Investor should aware of the various legal provisions relating to the
purchase of investment. The safest way to invest in securities issued by UTI,
NSC etc.
Thank You