INTRODUCTION TO INVESTMENTS

Investment is the employment of funds on assets with

the aim of earning income or capital appreciation. What one does with his savings to make them increase over time is investment.

An investment is the current commitment of income for a period of time in order to derive future payments that will compensate the investor for : 1. The time the funds are committed, 2. The expected rate of inflation, and 3. The uncertainty of the future payments.

 Investment in a general sense:

For a layman, Investment means some monetary commitment. Economic Investment: To the economist, investment is the net addition made to the nations capital stock that consists of goods and services that are used in the production process. Financial Investment It is the allocation of money to assets that are expected to yield some gain over a period of time.

 RETURN

RISK
LIQUIDITY HEDGE AGAINST INFLATION

SAFETY

INVESTMENT ATTRIBUTES RETURN RISK LIQUIDITY TAX SHELTER

CONVENIENCE

Analysis

Valuation

Portfolio Construction

Portfolio Evaluation

-Investible Fund - Objectives -Knowledge

-Market -Industry -Company

-Intrinsic Value -Future Value

-Diversification -Selection and Allocation

-Appraisal -Revision

PORTFOLIO MANAGEMENT PROCCESS

SPECIFICATION OF INVESTMENT OBJECTIVES AND CONSTRAINTS CHOICE OF ASSET MIX

FORMULATION OF PORTFOLIO STRATEGY SELECTION OF SECURITIES

PORTFOLIO EXECUTION

PORTFOLIO REVISION

PORTFOLIO EVALUATION

 Liquidity

Time Horizon
Tax Concerns Legal and Regulatory Factors

Unique needs and preferences

Safety Temperament

 An Individual

A Government
A Pension Fund A Corporation

 Accumulation Phase : Early to middle years

Consolidation Phase : Past the midpoint of their

careers. Spending Phase : Retire Gifting Phase : Similar to Spending Phase

Net Worth Accumulation Phase a)Long term b)Short term Consolidation Phase a) Long term b) Short term

Spending Phase/ Gifting Phase a) Long term b) Short term

25

35

45

55

65

75

85

Age

 Near term, high priority goals

Long term , high priority goals

Lower priority goals

INVESTMENT V/S SPECULATION/GAMBLING

BASIS
Planning Horizon

INVESTOR
Long

SPECULATOR
Short High High

GAMBLER
Short High Less

Risk Moderate Disposition Return Modest Expectation Basis For Decisions Leverage Fundamental No

Technical Entertainment High High

APPROACHES TO INVESTMENT

DECISION MAKING
Fundamental Approach
Psychological Approach
Academic Approach

Mp Iv
Random Walk Positive Link..Risk & Return

Eclectic Approach

QUALITIES FOR SUCCESSFUL

INVESTING Contrary Thinking Patience

Composure
Flexibility And Openness Decisiveness