Basics of Investment

A presentation dealing with the basic concepts of Investent.

1. Investment Concept, Risk, Return & Diversification

2. Syllabus Meaning and concept Investment objectives various asset classes factors in investment decisions Investment process concept of risk and return – sources of risk Measurement of risk and return Diversification and hedging Ethical investing .

3. What is an Investment? An investment is an asset or item acquired with the goal of generating income or appreciation. An investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit. It is a commitment of funds in monetary assets, made in the expectation of some positive rate of return.

4. Savings and Investment!

5. Characteristics of an Investment RETURN RISK SAFETY LIQUIDITY

6. Objectives of Investment GROWTH SAFETY REGULAR RETURNS/INCOME TAX BENEFITS LIQUIDITY HEDGE AGAINST INFLATION

7. Benefits of Investment Income Capital Appreciation Highly Regulated Tax Advantages Collateral Confidentiality Flexibility Operating Convenience Liquidity Hedge against Inflation Spreading Risk

8. Higher Risk Capital Gain in short term Shorter Period Lower Risk Regular returns + Capital Appreciation Longer Period Investment Speculation

9. Asset classes Real Investments 1. Real Estate 2. Commodities 3. Bullion 4. Art

10. Asset classes Financial Investments 1. Equities 2. Debts 3. Mutual Funds 4. Deposits 5. Life Insurance Policies 6. Govt /Semi- Govt Securities

11. Investment process Defining Investment Objectives Analyzing Securities Portfolio Construction Portfolio Evaluation Portfolio Revision

12. Risk & Return Calculating Expected return… Calculating Total Risk… Calculating Systematic Risk…

13. Diversification & Hedging Diversification aims at minimizing the risk or reducing the magnitude of possible losses by spreading the investment into various asset classes. Hedging is the process of controlling/offsetting the possibility of loss by bearing a hedging cost. “A risk management strategy used in offsetting the probability of loss from fluctuations in the prices of commodities, currencies, or securities.” The most common way of hedging in the investment world is through derivatives .

14. Ethical Investment Ethical investing refers to the practice of using one's ethical principles as the primary filter for the selection of securities investing . D epends on an investor's ethical views rather than economic motives. Gives the individual the power to allocate their savings towards companies whose practices and values align with their personal beliefs . The earliest recorded instance of ethical investing in America was by the 18th century Quakers, who restricted members from spending their time or money in the slave trade . Example: Islamic banking, which shuns investments in alcohol, gambling, pork and other forbidden items.

15. How to Invest Ethically? Analyzing investments using ethical standards. H istorical , current, and projected performance of the investment should be scrutinized . It is also important to confirm the company's commitment to ethical practices. A company's mission statement

16. Sources of Risk Market Risk Interest Rate Risk a) Reinvestment Risk b) Price Risk Purchasing Power Risk Regulation Risk Business Risk International Risk Liquidity Risk

17. Previous Questions - Explain Systematic and Unsystematic risk with examples. Explain the different dimensions of Investment and its contents as a process. Financial Investments include those instruments and Institutional media into which savings are placed. But general sense it is so different in common man. Make a comment. Analyzing the life cycle of the Industry may give more clarity on the proposed investment decision of the investor not the trader. Justify the statement. Manu Antony Chachirayil 9567320002