Investment &

Portfolio
Management

Introduction
Objectives:

1. Define investing.
2. Discuss the difference between investing and saving.
3. Enumerate different types of investments.
4. Name things to consider before investing.
5. Apply some investing tips.
6. Define risk tolerance.
7. Discuss the different types of risk tolerance.
* Savings and Investments form an integral part of one’s life.
* Investments refer to the employment of funds with an
objective of earning a favorable return on it. In other words,
investment is a process, where money is being utilized with a
hope of making more money.
* Investment is the commitment of money that have been saved by
deferring the consumption and purchasing an asset, either real or
financial with an expectation that it could yield some positive future
returns
What is Investing?

– Investing involves committing money in order to earn a financial

return. This essentially means that you invest money to make money
and achieve your financial goals.
*That is the super concise investing definition that comes courtesy of
Merriam-Webster.
*Regardless of where you invest your money, you're essentially giving your
money to a company, government, or other entity in the hope they provide
you with more money in the future.
*People generally invest money with a specific goal in mind, for example,
retirement, their children's education, a house — the list goes on.
Investing is different
from saving or trading
– . Generally, investing is associated with putting money away for a long
period of time rather than trading stocks on a more regular basis.
Investing is riskier than saving money.
– Savings are sometimes guaranteed but investments are not. If you were
to keep your money under the mattress and not invest — you'd never
have more money than what you've put away yourself.
– (see illustration in the next slide)
Types of Investments

1. Stocks
2. Bonds
3. Mutual funds
4. Real estate
5. Commodities
Things to consider before investing

– First things first. Before you start investing in anything, you should ask
yourself a couple important questions.
– These questions determine whether you’re in good enough financial
shape to start investing right now — here are the basics:
– 1. Do you have a lot of credit card debt?
– If the answer is yes, you’re probably not in a position to invest quite yet.
First, do everything you can do to erase that debt, because no investment
you’ll find will consistently outperform the 14% or so that you’re likely
forking over to a credit card company to service your debt.
– 2. Do you have an emergency fund?
– In polite terms, poop happens. Layoffs, natural disasters, sicknesses —
let us count the ways in which your life can be turned upside down.
– Any financial advisor will tell you that in order to avoid total ruin you
should have between six months and a year of total living expenses in
cash, or in a savings account should the unthinkable happen.
– If you don’t, bookmark this article, start saving, and come back just as
soon as you’ve got that emergency fund squared away.
Beginners investing tips

– Before we go over the specifics of what you should consider

investing in, be it stocks, bonds, or your cousin Brian’s yakalo farm
— let’s first go over the basics of how one invests.
– Investing is what happens when at the end of the month, after the bills are
paid, you’ve got a few dollars/pesos left over to put towards your future.
– No investing happens without putting money away.
– How are you supposed to find those elusive extra dollarspesos to save?
Here’s how:
Avoid lifestyle creep

– In all likelihood, you’ll earn more in your thirties than you did in your twenties, and
even more than that in your forties. The key to saving is to do your absolute best to
avoid what’s called “lifestyle creep”. If you haven't heard of this before, let us explain.
– Lifestyle creep means that as you make more money, what once seemed like luxuries
become necessities.
– Whole roasted pigeon and oyster concassé may be sublime and all but just because
you have the $626 in your checking account to cover the tasting menu at Guy
Savoy doesn’t mean you should.
– Instead, you should do your very best to live the same way you’ve always lived. Then
put away the extra money you’re making from your raises rather than increase your
spending.
– Skip the pigeon, get yourself a croque monsieur, and invest the 600 bucks you saved!
Start investing — even a little at a
time

– Once you’ve got savings, you’ll absolutely want to invest.

– Inflation will almost always outpace the interest rate that you’ll be able to
get on a savings account.
– You’ll be effectively saving and losing money at the same time.
– This is why you should start investing as soon as you can.
– (see illustration 2 in the next slide)
Remember….

– Investing is not just for the Warren Buffet's of the world.

– If you are finding it tough to put away some investing money each month,
try using a spare change app. These services round-up your purchases,
allowing you to invest small amounts of money that you'd hardly miss.
– For example, if you spent $3.39 on a coffee then $0.61 would be
invested.
– Investing small amounts of money is a great habit to get into and your
money will add up over time.
If you're looking for more easy ways to
invest with little money, here they are.

1. Know what you're investing for

– How you invest depends on what exactly you're investing for.
– You might be investing money to help your 14 year old with her upcoming
university tuition.
– You might want to invest money to live off when you retire in 30 years or so.
– The time horizons on each of these investments are very different. Because
you'll need access to some of them sooner than others.
– Those with shorter horizons should invest more conservatively. Those
investing money they don't need for a long time can choose riskier
investments.
2. Understand the risk you are taking
– Before deciding where to invest, you’ll need to first assess your personal
risk tolerance.
– This is a fancy way of saying how much of your investment you can really
afford to lose.
– If you need money for next month’s rent, you have a very low-risk
tolerance.
– If your life wouldn’t be materially affected in any way, if rather than
investing money, you set fire to it, your risk tolerance is through the roof.
– Risk tolerance is often dictated by your so-called “time horizon”.
– This may sound like something you’d hear on the bridge of the Starship
Enterprise, but instead, it's just a term that means the length of time you’ll
hold a particular investment.
– Savings accounts are typically seen as low risk. They are
appropriate for holding your emergency fund, rainy day
money, or this month rent.
– Investing is much more suited to money you don't need in
the short term, for example your retirement savings, or a
fund for your child's university education.
3. Diversify your investments
– Rather than zero-in on some stock you think will perform well,
diversify your investments.
– In doing this, if one part of your investment doesn't do well you
haven't lost everything.
– Michael Allen, a Portfolio Manager at Wealthsimple explains that
diversifying your portfolio means investing in many different
geographies, industries, and asset classes (stocks, bonds, real
estate etc).
– To potentially smooth out your investment returns over time you
could put your money in many investments that are uncorrelated
with one another.

– This is, “putting your eggs in different baskets”.

– It is explained that fluctuations aren't necessarily the biggest risk for
investors in it for the long haul.
– A potentially bigger risk is how you react to the fluctuations. Many
investors find it difficult to stick to their investing plan—particularly during
market movements.
– A diversified portfolio that's prone to less market movements can come in
useful to help manage your emotions.
4. Invest for the long-term
– If you can, invest for the long term. Many studies demonstrate that
investors who hold onto stocks for more than 10 years will be rewarded
with higher returns that offset short-term risks.
– That's not to say this trend will continue, or that risk is ever totally
eliminated. Risk never disappears, but you might say it mellows with age.
– If you can put money away for a long time period, then you can afford to
have investments that are typically more susceptible to rising and falling.
– Your portfolio can contain a mix of stocks and equities that are typically
more volatile compared to bonds.
– Regardless of how long you're investing for, diversifying your portfolio is
an absolute must.
– One thing is also for sure — if you invest for a long time period you
benefit from the power of compounding.
– This is the process by which the money you make earns interest on itself
over time.
– The earlier you start investing, the more you benefit from compounding
over time.
5. Watch out for high fees
– Fees are the money you put into someone's pocket rather than your own.
– Regardless of how you invest, you're going to pay fees. What you need
to watch out for is high fees.
– They'll have a significant drag on your returns. You need to consider the
value you're getting in exchange for paying fees.
6. Make an investing plan and stick to it
– One of the biggest reasons many investors have low returns is because
they sell at the wrong time.
– They often base decisions on recent performance. They look at what has
been doing well or not so well recently.
– Many investors tend to buy things that have appreciated in value and sell
things that have declined in value.
– Rather than do this, you should create a plan you will think will help you
reach your goals over the time period you have to invest.
– Don't stop investing because of bad performance.
– Stick to your plan without buying or selling based on your opinion of what
will happen in the near future.
– If you're ready to put all these beginners investing tips to good use, find
an investment platform.
Thank you very much…..