Introduction of investment Management .pptx

Investment – Meaning and Process of Investment Management – Speculation – Gambling, Difference between Speculation, Gambling and Investment – Type of Investors - Factors influencing the investment choice - Investment Avenues in India

1. Unit 1 s4obez2g

2. Introduction Investment – Meaning and Process of Investment Management – Speculation – Gambling, Difference between Speculation, Gambling and Investment – Type of Investors - Factors influencing the investment choice - Investment Avenues in India

3. Meaning of Investment Management Investment management means taking care of your money by putting it into things like stocks, bonds, or property so it can grow over time or earn income. It includes: Choosing where to invest Managing those investments regularly Trying to earn the best return with the least risk

4. Example: If you have ₹10,000 and want it to grow, you can invest it in shares or mutual funds. A professional or you yourself will decide: Where to invest , When to buy or sell , How to balance risk and reward. A simple definition "Investment management is the process of planning and handling money to help it grow or earn income."

5. Process of Investment Management Set Investment Goals What it means: Decide why you're investing. Example goals: Buy a house, save for retirement, or earn regular income. What to consider: How much money you need, how long you’ll invest, and how much risk you can take.

6. Decide Asset Allocation What it means: Choose how to divide your money across different types of investments. Main types: Stocks (high return, high risk) Bonds (stable, lower return) Real estate Cash (safest, but lowest return) Why it’s important: Helps balance risk and return.

7. Pick Specific Investments What it means: Choose the exact things to invest in (like buying shares of a company). How to choose: Based on research (company profits, market trends, etc.) Build Your Portfolio What it means: Put all your chosen investments together into one mix. Goal: Diversify (don’t put all your money in one place) to reduce risk.

8. Monitor and Rebalance What it means: Check your investments regularly. Rebalancing: If one type of investment grows too much, shift money to keep your original balance. Why it matters: Keeps you on track with your goals. Evaluate Performance What it means: See how well your investments are doing. Tools: Compare with a benchmark (like the stock market index) and check returns. Adjust if needed: Change plan if you’re not meeting your goals.

9. Step What You Do Why It’s Important 1. Set Goals Know your purpose Guides all decisions 2. Allocate Assets Divide your money Match risk and reward 3. Select Investments Pick what to invest in Aim for good returns 4. Build Portfolio Combine investments Reduce risk 5. Monitor & Rebalance Review regularly Stay on track 6. Evaluate Performance Check results Improve strategy

10. Speculation Speculation means buying or selling assets (like shares, real estate, or gold) with the hope of making a quick profit from price changes . It involves high risk . The focus is on short-term gains . It is based on predictions about future price movements , not long-term value. Definition : Speculation is taking a financial risk to earn quick profits by guessing price changes

11. Example: A person buys a stock for ₹100, expecting it to go up to ₹150 in a few days. If the price rises, they sell and make a profit. But if the price falls, they lose money.

12. Features of Speculation: High risk, high reward Short time frame No guaranteed returns Often based on market rumors or trends , not detailed analysis

13. Dangers of Speculation: Can lead to big losses Market may not behave as expected Not suitable for all investors

14. Point Investment Speculation Goal Long-term growth or income Quick profit Risk Level Moderate High Time Horizon Long-term Short-term Based On Fundamentals and research Market trends and guesses Example Buying shares to hold for years Buying shares to sell in a few days

15. Meaning of Gambling in Investment: Gambling refers to taking blind or reckless financial risks with the hope of making a big profit , without proper analysis or planning. In investment management, gambling means putting money into assets without research, strategy, or understanding the risks , just hoping to get lucky . Definition : Gambling in investment means taking high risks without proper knowledge or analysis, just for quick gains .

16. Examples: Buying a stock because of a rumor, not because of research. Putting all your money in one risky crypto coin expecting to become rich overnight. Trading based on guesswork or "gut feeling" instead of a plan.

17. Why Gambling is Risky in Investment: No planning or strategy High chances of losing money No control over outcome Based on luck, not skill or knowledge

18. Key Points to Remember: Gambling is not the same as investing. Investors aim for steady growth using knowledge. Gambling can cause big financial losses. Smart investors avoid gambling behavior .

19. Point Investment Speculation Gambling Meaning Putting money in assets for long-term growth or income Taking higher risk for short-term profit Taking a blind chance to win money without analysis Goal Steady returns over time Quick profit from price changes Quick and big win (luck-based) Risk Level Low to moderate High Very high Time Horizon Long-term (years) Short-term (days/weeks) Very short-term or instant Based On Research, analysis, fundamentals Market trends, price movement predictions Luck, guesswork, no research Returns Stable and expected Uncertain, can be high or low Highly uncertain, mostly loss Approach Careful, strategic, well-planned Risky but somewhat calculated Risky and reckless, no planning Examples Buying mutual funds, real estate, or bonds for 10 years Trading stocks for quick gains based on trends Playing lottery, betting on a coin toss

20. types of investors - Based on Investor Profile a . Retail Investors Individual investors. Typically invest smaller amounts. Use brokers, mutual funds, ETFs, etc. Focused on personal financial goals (e.g., retirement, education). b. Institutional Investors Organizations that invest large sums. Examples: Pension funds, insurance companies, mutual funds, endowments. Have access to sophisticated tools, analytics, and lower fees. Influence market prices due to the size of trades.

21. Based on Risk a. Conservative Investors Low risk tolerance. Prefer capital preservation. Invest in bonds, fixed deposits, money market instruments. b. Moderate Investors Balanced approach. Mix of equity and debt instruments. Aim for steady returns with moderate risk.

22. c. Aggressive Investors High risk tolerance. Focus on capital appreciation. Invest in stocks, derivatives, start-ups, etc.

23. Based on Time Horizon a. Short-term Investors Investment horizon: few months to 1–2 years. Focus on liquidity and quick returns. Prefer money market instruments or short-term bonds. b. Long-term Investors Horizon: 5+ years. Focus on wealth creation and compounding. Favor equities, real estate, and retirement funds.

24. Based on Investment Style A. Active Investors Frequently buy/sell to outperform the market. Rely on market timing and research. Higher fees and risk. b. Passive Investors Long-term "buy and hold" strategy. Invest in index funds or ETFs. Lower fees and less trading activity.

25. Investor Type Key Feature Risk Appetite Investment Horizon Individual Investors Personal goals Varies Short to long Institutional Investors Large-scale, strategic Moderate to low Long-term Angel Investors Early-stage startups High Medium to long Venture Capitalists High-growth startups Very high Medium-term Private Equity Investors Buyouts, value creation High Medium to long Hedge Funds Complex, aggressive strategies High Short to medium Mutual Funds / ETFs Diversified pooled investments Varies Varies Family Offices Custom wealth solutions Varies Long-term Government Investors National/public interest focus Low to medium Long-term

26. Types of Investors in Investment Management - On the Basis of Risk Tolerance Type of Investor Description Risk-Averse Investor Prefers low-risk investments like fixed deposits, bonds. Prioritizes capital preservation. Risk-Neutral Investor Focuses only on expected returns. Risk is not a key factor in decision-making. Risk-Seeking Investor Willing to take high risks for the possibility of higher returns (e.g., startups, crypto).

27. On the Basis of Investment Horizon (Time) Type of Investor Description Short-Term Investor Seeks quick gains within a year. Invests in liquid assets like money market instruments. Medium-Term Investor Investment horizon of 1–5 years. May include bonds, mutual funds. Long-Term Investor Holds investments for 5+ years. Focuses on wealth creation (e.g., real estate, equity).

28. On the Basis of Personality / Behaviour Type of Investor Description Conservative Investor Avoids risk, prefers fixed income or guaranteed returns. Moderate Investor Balanced approach between safety and growth. Diversifies portfolio. Aggressive Investor Seeks high growth, willing to accept large fluctuations in returns.

29. On the Basis of Legal Entity Type of Investor Description Individual Investor (Retail) A person investing personal savings for financial goals. Institutional Investor Large organizations like banks, insurance firms, pension funds investing large sums.

30. On the Basis of Investment Style Type of Investor Description Active Investor Actively manages portfolio, frequently buys/sells based on market trends. Passive Investor Invests for the long-term in index funds or ETFs, minimal portfolio changes. Speculative Investor Invests for short-term price movement. High risk, high return. Growth Investor Focuses on companies with strong growth potential. Value Investor Looks for undervalued stocks with strong fundamentals.

31. On the Basis of Income Level Type of Investor Description High Net-Worth Individual (HNI) Wealthy individuals with large investable assets. Middle-Income Investors Typical salaried individuals investing for retirement, education, etc. Low-Income Investors Small savings, prefer safe, low-cost instruments (e.g., post office schemes).

32. On the Basis of Geography Type of Investor Description Domestic Investor Resides in the country where investment is made. Foreign Investor (FPI/FII) Invests in markets outside their home country.

33. Types of Investors

34. Factors influencing the investment choice - Personal Factors Risk Tolerance - Willingness and ability to take financial risk (low, medium, or high ). Investment Goals- Purpose of investment (e.g., retirement, buying a house, education, etc .). Time Horizon - Duration an investor is willing to hold the investment (short, medium, long ). Age & Life Stage - Younger investors may take more risk; older investors prefer stability . Income Level - Higher income may allow for more aggressive investment choices . Liquidity Needs - Need for quick access to funds may limit investment in illiquid assets.

35. Financial Factors Return Expectations - Higher expected returns may push investors toward riskier options. Inflation - Investors seek returns that outpace inflation to preserve purchasing power. Tax Considerations - Tax benefits or liabilities can affect asset choices (e.g., tax-saving bonds ). Diversification - Spreading investments across asset classes to reduce risk.

36. Economic & Market Factors Market Trends & Sentiment - Bullish markets encourage equity investment; bearish trends may discourage it. Interest Rates - Rising rates make fixed-income more attractive, and vice versa. Economic Conditions - GDP growth, employment, inflation, etc., influence investor confidence.

37. Psychological Factors Herd Mentality Investors follow crowd behavior, sometimes irrationally. Overconfidence Belief in one's ability to predict or time markets can drive aggressive choices . Fear & Greed Emotional responses that lead to impulsive investment decisions.

38. Regulatory & Institutional Factors Legal Restrictions Certain investments are restricted or regulated (e.g., for institutional investors). Information Availability Accessibility to reliable data affects decision-making. Financial Advisory Access Investors with guidance may make more informed choices.

39. Investment Avenues in India -Bank & Post Office Investment avenues refer to the various options available for individuals and institutions to invest their money with the goal of earning returns and meeting financial goals. In India, investment avenues can be broadly classified into financial and non-financial assets , and further into market-linked and fixed-income instruments.

40. Bank Deposits Types : Savings Account, Fixed Deposits (FDs), Recurring Deposits (RDs) Features : Safe and low risk Fixed interest Highly liquid (especially savings accounts) Ideal For : Risk-averse investors

41. Post Office Savings Schemes Examples : National Savings Certificate (NSC) Public Provident Fund (PPF) Sukanya Samriddhi Yojana Monthly Income Scheme (MIS) Features : Government-backed Tax benefits under Section 80C Moderate returns, low risk

42. Public Provident Fund (PPF) Features : 15-year maturity Tax-free returns Interest compounded annually Tax Benefit : Available under Section 80C Safe for : Long-term investors

43. Equity Shares (Stocks) Features : Ownership in a company Potential for high returns and dividends Market risk involved Suitable For : Risk-tolerant investors with long-term goals

44. Mutual Funds Types : Equity Mutual Funds Debt Mutual Funds Hybrid Funds Features : Professionally managed Diversification reduces risk SIP (Systematic Investment Plan) option Tax : ELSS (Equity Linked Saving Scheme) provides 80C benefit

45. Bonds and Debentures Types : Government Bonds Corporate Bonds Features : Fixed interest (coupon rate) Lower risk than equity Regular income stream Ideal For : Conservative investors

46. Real Estate Features : Investment in land, houses, commercial buildings Long-term capital appreciation Requires large capital and low liquidity Risks : Legal issues, market fluctuations

47. Gold and Precious Metals Forms : Physical (jewelry, coins) Digital (Sovereign Gold Bonds, Gold ETFs) Features : Hedge against inflation Cultural significance in India Moderate returns, safe asset

48. Provident Fund (EPF) For : Salaried employees Features : Mandatory contribution by employee and employer Tax-exempt on maturity Retirement corpus

49. National Pension System (NPS) Features : Voluntary retirement savings scheme Tax benefits under Section 80CCD Mixture of equity and debt exposure Ideal For : Retirement planning

50. Insurance Plans (as investment) Types : Endowment Plans Unit Linked Insurance Plans (ULIPs) Features : Life coverage + savings/investment Tax benefits under 80C

51. Investment Avenue Risk Return Potential Liquidity Suitable For Bank Deposits Low Low High Risk-averse Post Office Schemes Low Moderate Moderate Long-term, tax savers PPF Very Low Moderate Low Long-term retirement Equity Shares High High High Risk-taking investors Mutual Funds Medium Medium to High Moderate Diversified investors Bonds/Debentures Low Fixed Moderate Fixed-income seekers Real Estate Medium High (long term) Low Capital appreciation goal Gold Low-Med Moderate Moderate Inflation hedge EPF Very Low Moderate Low Salaried employees NPS Low-Med Moderate Low Retirement planning Insurance (ULIP) Low-Med Moderate Low Protection + returns Crypto Assets Very High Very High High Speculative investors