Investment Management

Charles Marc A. Arendaing, CPA

Investment
• Assets acquired to realize income or earn
profit
• Purchase of goods that are not consumed
today but are used in the future to create
wealth
• Appreciate and be sold at a higher price
Investment Portfolio
• Collection of financial assets that may be held
by individual investors or managed by financial
professionals, hedge funds, banks, or other
financial institutions
Investment Management
• Process of defining investment to optimum
results considering the risks involved &
evaluating its performance periodically
• Professional management of various securities
& assets to meet certain financial goals
 Forms of Investments
• Savings accounts
• Time deposit
• Special savings deposit
• Trust Investment
• Treasury Bills
• Commercial Paper
• Bonds
• Stocks
• Mutual Funds
• Real Estate
Securities
• Financial instrument that represents
a. ownership position (shares of stock)
b. creditor relationship w/ governmental
body or corporation (bonds)
c. rights to ownership as represented by an
option (share option)
Diversification of Investment

• Spreading of investible funds to different

investment items
Factors in Allocating Investible Funds
• Cash needs
• Financial limitations
• Risk preference or tolerance
• Time Horizon
• Laddered timing
- purchasing multiple financial products with
different maturity dates
• Market Timing
- act of moving investment money in or out of a
financial market or switching funds between
asset classes based on predictive methods
Financial Markets
• Venue for buying and selling financial
instruments
• Can be money market or capital market

Money market = short-term

Capital market= long-term
Common Mistakes in Investing
• Failure to make financial plan for the future
• Miscalculating risk tolerance
• Failing to keep sufficient amount of funds for
emergency purposes
• Jumping on a bandwagon
• Inability to have leverage
• Over-diversification
Common Mistakes in Investing
• Erroneous timing of the market
• Failure to keep a long-term perspective
• Inability to cut losses
Shares, Stocks, or Shares of stocks

• a financial instrument that represents

ownership in a company or corporation and
represents a proportionate claim on its assets
and earnings
 Classifications of stocks
A. Based on Risk & Earning Potential
1. Blue Chips – long record of earning &
dividends payments
2. Growth stocks – growth rate is faster than
of the general economy
3. Cyclical stocks – affected by the changes in
national economy
4. Defensive stocks – earnings are not
affected by changes in economy
5. Speculative stocks – expected to operate
profitably in the future
Classifications of stocks
B. Based on Marketability
1. Listed (PSE)
2. Unlisted
C. Based on Citizenship of Investors
1. Class A – Filipinos only
2. Class B – Foreigners & Filipinos
D. Based on Rights
1. Common stock/ Ordinary Shares
2. Preferred stock/ Preferred Shares
Classifications of stocks
E. Others
1. Treasury shares – entity’s own shares
that have been issued and then
reacquired but not cancelled
2. Donated shares – shares received by the
entity from its shareholders by way of
donation
 Rights of stockholders
A. Common stock/ Ordinary Share
1. Represent basic ownership
2. Carries extensive rights in the
competition
- voting rights
- rights to dividends
- pre-emptive rights (retain % of stocks)
B. Preferred stocks (Preference shares)
- enjoy preference over common stock
1. Preference on dividends
2. Preference on liquidation
Parties Involved
1. Investor
2. Stock market
3. Broker
4. Stock clearing office (BSP)
5. Stock transfer office (Corporation itself)
Capital Markets
• Institutions where securities are traded
1. Primary Markets – issuance of new
securities (IPO)
2. Secondary Markets – trading of
outstanding securities

Over-the-counter markets - trading of shares not

listed in PSE but SEC-registered