INVESTMENT

CONCEPT AND PROCESS

INTRODUCTION OF INVESTMENT
Investment is the sacrifice of certain present value for the uncertain future reward. Investment may also be defined as an activity that commits funds in any financial or physical form in present with an expectation of receiving additional returns in the future period. The expectation brings with it a probability that the quantum of return may vary from minimum to a maximum. This possibility of variation in the actual return is known as investment risk. Thus every investment involves a return & risk.

TYPES OF INVESTMENT
FINANCIAL INVESTMENTS In financial sense ,investment is commitment of funds to derives future income in form of interest, dividends, premium, post office saving certificates, an insurance policy. Such investments are undertaken by anyone who desire a return and is willing to accept the risk from financial investments. ECONOMIC INVESTMENTS These are undertaken with an expectation of increasing the current economys capital. Capital stock is used in production of goods & services required by society. It expects formation of new & productive capital in form of new constructions, plant & machinery, inventories and so on. Such investments generate physical asset & also industry activity. These activities are undertaken by corporate entities that participate in capital market.

CHARACTERSTICS OF INVESTMENTS
RETURN
Investments are made with the primary objective of deriving a return. The expectation of a return may be in the form of income as well as through capital appreciation. The expectation of return from an investment depend upon the nature of investment, maturity period, market demand.

RISK
Risk is a inherent in any investment. Risk may relate to loss of capital, in repayment of capital, non-payment of interest, variability of returns. Some investments such as government securities & bank deposits are without risk. Risk of investment is determined by investments maturity period, repayment capacity, nature of return commitment.

 SAFETY

The safety of investment is identified with certainty of return of capital without loss of money & time. Investment safety is gauged by the reputation established by borrower of the funds. For example:- Investment is considered safe especially when it is made in securities issued by government of developed nation. LIQUIDITY An investment that is easily saleable or marketable without loss of money or loss of time is said to posses the characteristics of liquidity Investment instruments such as shares & debentures(listed on Stock Exchange) are easily marketable whereas post office deposits , national saving certificate are not marketable. A well developed secondary market for securities increases the liquidity of instruments traded therein. An investor tends to prefer maximization of expected return, minimization of risk, safety of funds, and liquidity of investments.