BA 9257 SECURITY AND

PORTFOLIO MANAGEMENT

FACILITATOR- PRAVEEN KUMAR

 INTRODUCTION
• Investing is an interesting activity that attracts
people irrespective of their occupation,
economic status, education and family.
• The investor who is having extra cash could
invest it in securities or it any other assets like
gold/real estate or in banks.
• The company like to invest their money in the
extension of existing firm or undertake new
firm.
 INVESTMENT - PERSPECTIVE
• Investment is the employment of funds on assets
with the aim of earning income or capital
appreciation.
• It has 2 attributes namely time and risk.
• Economic view-
– To the economist the investment is the net addition
made to the nations capital stock that consists of goods
and services that are used in production process.
(capital stock- buildings, equipments, inventories etc )
 … contd
• Financial investment is the allocation of money to assets
that are expected to yield some gain over a period of time.
– It is an exchange of financial claims such as stocks and bonds for
money.
– They are expected to yield returns and experience capital growth
over the years.

• The financial and economic meanings are related to each

other because the savings of the individual flow into the
capital market as financial instruments to be used in
economic investment

• We considered the financial instrument made on securities

 SPECULATION/GAMBLING
Speculation Gambling
• Speculation means • A gamble is usually a
taking up the business very short term
risk in the hope of investment in a game or
getting short term gain. chance.
• It involves buying and • Time horizon is shorter
selling activities with than both investment
the expectation of and speculation.
getting profit from price • It employs a artificial
speculation risk.
 INVESTMENT OBJECTIVES
• The main objectives are increasing the rate of
return and reducing the risk.
• Other objectives are
– Return
– Risk
– Liquidity
– Hedge against inflation
– Safety
 INVESTEMENT PROCESS
INVESTMENT PROCESS

PORTFOLIO PORTFOLIO
INVESTMENT POLICY ANALYSIS VALUATION CONSTRUCTION EVALUATION

-INVESTIBLE FUNDS -MARKET

-OBJECTIVE -INDUSTRY
-INTRINSIC VALUE -DIVERSIFICATION -APPRAISAL
-FUTURE VALUE -SELECTION AND ALLOCATION -REVISION
-KNOWLEDGE -COMPANY
 SECURITIES
• Various types of securities are traded in the
market.
• Securities include shares, stocks, bonds,
debentures etc.
• Securities are classified on the basis of return
and the source of issue.
– Fixed income securities(Bonds, Debentures and
preference shares)
– Variable income securities(equity shares)
 SECURITIES
• Equity shares.
• Sweat equity.
• Nonvoting shares.
• Right shares.
• Bonus shares.
• Preference stock.
– Cumulative preference shares.
– Non- cumulative shares.
– Convertible preference shares.
– Redeemable preference shares.
– Irredeemable preference shares.
– Cumulative convertible preference shares.
 EQUITY SHARES
• Equity shares are commonly referred to common stock or
ordinary shares.
• Share capital of a company is divided into a number of
small units of equal value called shares.
• Stock- bundle of shares.(it expressed in terms of money
and not as many shares)
• Advantages of equity shares
– Capital appreciation
– Limited liability
– Free tradability
– Tax advantages
– hedge against inflation
 SWEAT EQUITY
• It is a part of equity share capital.
DEFINITION
• Shares issued at a discount to employees and
directors.
• Shares issued for consideration other than
cash for providing know how or making
available rights in the nature of intellectual
property rights /value addition.
 PREFERENCE STOCK
• The characteristic of stock are hybrid in nature.
• Some of its features resemble the bond and
others equity shares.
• Like the bonds their claims on the company's
income are limited and they received fixed
dividend.
• In the event of liquidation of the company their
claims on the assets of the firm are also fixed.
 DEBENTURES
• Debentures includes debentures stock, bonds and any
other securities of company.
• It generally issued by the private sector companies as
along term promissory note for raising loan capital.
• public sector companies and financial institutions issue
bonds.
• Characteristic features of debentures.
– Form(rate of interest and redemption date)
– Interest(rate of interest is fixed at the time of issue itself which is
known as contractual/ coupon rate of interest)
– Redemption(repayment (principal amount) before maturity)
– indenture
 TYPES OF DEBENTURES
• Secured or Unsecured
• Fully convertible debenture.
• Partly convertible debenture.
• Non – convertible debenture.
 BOND
• Bond is along term debt instrument that promises to
pay a fixed annual sum as interest for specified period
of time.
• Characteristic of bond
– It have a face value. The face value called par value.
– The bond may be issued at par or at discount.
– The interest rate is fixed.
– Some time the IR be variable in terms of floating rate bond.
– Interest rate is paid annually /semi annually.
– The interest rate is known as coupon rate.
– Maturity date and redemption value also stated in bonds.
– Bonds are traded in the stock market
 TYPES OF BONDS
• Secured bonds and unsecured bonds.
• Perpetual bonds and redeemable bonds
• Fixed interest rate bonds and floating interest
rate bonds
• Zero coupon bonds
• Deep discount bonds
• Capital indexed bonds.
 INVESTMENT INFORMATION
• International affairs.
• National affairs.
• Industry information.
• Company information.
• Stock market information.
 INVESTMENT ALTERNATIVES
• The investment alternatives ranges from financial securities
to traditional non security investments.
• The financial securities may be negotiable / non negotiable.
• Negotiable securities- transferable/it may yield variable
income or fixed income
– Equity shares
– Bonds
– Debentures
– Vikas patras
– Kisan vikas patras
– Government securities
– Money market securities
 …. contd
• Non negotiable financial instrument- non
transferable
– Deposit schemes offered by the post offices
– Banks
– Companies
– NBFC’S
– PPF
– National saving certificates.
 …contd
• Mutual funds
• Life insurance
• Real estates
• Gold ,silver, arts, property and antiques are
non financial instruments.