Meaning of Investment

Meaning of Investment

1. Investment RUBY SHARMA RUBY SHARMA

2. What is Investment An instrument that promises some certain or uncertain return in the future. Process of using money (called capital) to buy an asset that will generate a safe and acceptable return over time. Investment means willing to take some risk and putting your money in instruments with potential of higher returns. RUBY SHARMA RUBY SHARMA

3. WHAT IS INVESTMENT ? “Investment may be defined as the purchase by an individual or institutional investor of a financial real asset that produces a return proportional to the risk assumed over some future investment period. “An investment is a commitment of funds made in the expectation of some positive rate of return.” If the investment is properly undertaken, the return will be commensurate with the risk the investor assumes” RUBY SHARMA RUBY SHARMA

4. ONE NEEDS TO INVEST TO. EARN RETURN ON YOUR IDLE RESOURCES GENERATE A SPECIFIED SUM OF MONEY FOR A SPECIFIC GOAL IN LIFE MAKE A PROVISION FOR AN UNCERTAIN FUTURE ONE OF THE IMPORTANT REASONS WHY ONE NEEDS TO INVEST WISELY IS TO MEET THE COST OF INFLATION. INFLATION IS THE RATE AT WHICH THE COST OF LIVING INCREASES. Why should one invest? RUBY SHARMA RUBY SHARMA

5. INVESTMENT, SPECULATION AND GAMBLING Basis Investment Speculation Gambling 1.Planning Horizon Longer Very short Very very short 2.Risk Disposition Investor normally not willing to assume more than moderate risk Assumes higher risk Just for fun, risk created artificially. 3.Return Expectation Moderate return with limited risk High returns with high risk Risk without any commensurate economic return 4.Basis for Decision Greater significance to fundamental analysis Technical charts & market psychology Nothing 5.Leverage Investor uses his own funds and eschews borrowed funds Normally resorts to borrowings which can be substantial to supplement his personal resources XXXXXXXXXX RUBY SHARMA RUBY SHARMA

6. Features of an Investment Programme 1.Safety of Principal 2.Liquidity 3.Income Stability 4. Appreciation and Purchasing Power Stability 5. Legality and Freedom from Care 6. Tangibility 7. Tax Benefits RUBY SHARMA RUBY SHARMA

7. Individual and institutional investors RUBY SHARMA RUBY SHARMA

8. Investment Cycle RUBY SHARMA

9. A person, company, etc., That seeks the advice of a professional man or woman a person depending on another's patronage how to know the investor? Gain the personnel information of client. Find the need of the investor. Financial status of investor. Time period investor is having to achieve that goal. Understand the risk appetite of the investor. Client Profile RUBY SHARMA RUBY SHARMA

10. Objective should vary from person to person. Like daughter marriage. Building dream home. Children education. Objective of investment should be ethical. Both for long term and short term. AS WE KNOW THERE ARE THREE TYPES OF INVESTOR conservative, moderate, aggressive Objective and Risk analysis . RUBY SHARMA RUBY SHARMA

11. Differences Basis Conservative Moderate Aggressive 1.Extent of Risk Little Risk Fair amount of risk of capital loss. High Risk. 2.Level of Return Low level Slow and steady growth in value High Return 3.Current Income Moderate current income Seek slow capital gains and some current income - 4.Goal Capital preservation Asset accumulation Capital Appreciation 5.Risk Tolerance Risk Averter Moderate risk taker. Risk seeker Contd. RUBY SHARMA RUBY SHARMA

12. Basis Conservative Moderate Aggressive 6.Investment period Long-term No immediate need for funds. Long-term and short term 7.Tactics Selling investments when price rise 15% Selling investments when price rise in 25% Purchasing investments when price rise is 25% Long term and short term tactics. 8.Diversification Spreads funds among large number of investment alternatives. Spreads funds among large number of investment alternatives. Does not diversity much. 9.Avenues of investment Government bonds high quality corporate bonds, balanced mutual funds, certificate deposits. Dividend paying equity shares growth income mutual fund, high quality corporate bonds, government bonds, real estate Equity shares of new fast growing companies, highly yielding junk bonds. RUBY SHARMA RUBY SHARMA

13. Analysis of market and economic condition is very important . various economic and market factor I nflation . D ifferent rates . Historical market trend. Performance of particular scheme where you are going to invest. Etc………. Economic and Market analysis RUBY SHARMA RUBY SHARMA

14. A systematic approach to investing among different categories of investments. It determine the best way to divide investable assets into the various types of asset classes: diversification : i nvesting in a number of different investments, to reduce the overall risk of investments. Asset Allocation RUBY SHARMA RUBY SHARMA

15. After doing all now select the investment which fulfill your objective , goals, need, time and risk and than implement it. Investment selection and Implementation RUBY SHARMA RUBY SHARMA

16. Investment Avenues Bank deposits P.O. Deposits Co. Deposits P.F. Deposits INVESTMENT AVENUES Govt. Securities PSU Bonds Debentures Equity schemes Debt schemes Balanced schemes Agricultural land Semi Urban land Holiday Resorts FINANCIAL DERIVATIVES Gold and silver Precious Stones Art objects Endowment Plan Money Back Policy Whole life policy Premium back Term assurance Treasury Bills Commercial papers CDs Blue Chip Cos. Growth shares Income shares Cyclical Shares Speculative shares NON-MKTABLE FINANCIAL ASSETS BONDS MUTUAL FUND SCHEMES REAL ESTATE EQUITY SHARES MONEY MARKET INSTRUMENTS LIC POLICIES PRECIOUS OBJECTS Futures Options RUBY SHARMA RUBY SHARMA

17. EVALUATION OF VARIOUS INVESTMENT AVENUES Return Capital Appreciation Risk Liquidity Marketability Tax Shelter Conven-ience Equity Shares Low High High Fairly High Yes High Non-convertible Debentures High Negligible Low Average Nil High Equity Schemes Low High High High Yes Very high Debt Schemes High Low Low High Yes Very high Bank Deposits Moderate Nil Negligible High Yes Very high PPF Nil High Nil Average Yes Very High Life Insurance Nil Moderate Nil Average Yes Very High Residential House Moderate Moderate Negligible Low Yes Fair Gold and Silver Nil Moderate Average Average Nil Average RUBY SHARMA RUBY SHARMA

18. Approaches to Investment Decision-Making Fundamental approach: There is an intrinsic value of a security, which depends upon underlying economic (fundamental) factors. The intrinsic value can be established by a penetrating analysis of the fundamental factors relating to the company, industry, and economy. Psychological approach: Stock prices are guided by emotion rather than reason. Stock prices are believed to be influenced by the psychological mood of investors. RUBY SHARMA RUBY SHARMA

19. Academic approach: Fairly sophisticated methods of investigation are used by academic community to study various aspects of capital market. Past price behaviour cannot be used to predict future price behaviour. In the capital market, there is a positive relationship between risk and return. More specifically, the expected return from a security is linearly related to its systematic risk. RUBY SHARMA RUBY SHARMA

20. Eclectic approach The eclectic approach draws on all the three different approaches discussed previously. Operational implications of the eclectic approach Conduct fundamental analysis to establish certain value “anchors” Do technical analysis to assess the state of the market psychology. Combine fundamental and technical analysis to determine which securities are worth buying, worth holding, and worth disposing of Respect market prices and do not show excessive zeal in “beating the market”. RUBY SHARMA RUBY SHARMA

21. THANK YOU Sources: material available on internet RUBY SHARMA