Nature of Investment and Investment Analysis

Nature and Investment analysis

1. Nature of Investment

2. Sri Ramakrishna College of Arts & Science Coimbatore – 06. Topic: Nature of Investment M.VADIVEL Assistant Professor Department of B.Com PA Sri Ramakrishna College of Arts & Science Coimbatore . M.Vadivel

3. Nature of Investment Meaning The meaning of investment is putting your money into an asset that can grow in value or produce income or both. For example, you can buy equity stock of a listed company in the hopes of receiving regular dividends and capital appreciation in the form of the share price . M.Vadivel

4. Objectives of Investment Safeguard your Money Grow your Savings Build Funds for Emergencies Secures your Retired Life Save Tax Fund Bigger Life Goals M.Vadivel

5. Safeguard your Money Investing keeps your money safe from immediate and unnecessary expenditures. It also helps you keep your money safe from inflation effects.  Inflation  erodes the value of your money unless it is invested in an interest-earning asset. Thus, investing will help you automatically keep up with inflation . Grow your Savings Investment is the only way to start growing your invested money. It allows your money to earn interest and if you keep the interest invested it will also start to earn interest. M.Vadivel

6. Build Funds for Emergencies Life is usually a series of ups and downs. Few times you are earning decent and saving money while other times you need a large sum for an emergency. Building investment pools help you on such rainy days . Secures your Retired Life Retired life is where you don’t have a source of income to sustain your life. Once you have built a retirement corpus, you can experience the freedom that comes with it . Save Tax Investment in tax-saving instruments like life insurance plans, ULIPs, PPF, NPS, etc allows you to claim deductions on your taxable income. Thus, investing in specific assets can help you reduce your tax liability. Many of these investments also help you reduce your future tax with tax-free maturity values. M.Vadivel

7. Fund Bigger Life Goals Your monthly income will not be enough to purchase your next car or build a house for your family. However, if you invest a small sum in a few years both could be possible. M.Vadivel

8. types of investment options in India Investment Type Description Risk Reward Stocks Stocks represent your ownership share in the company. Stocks will provide a return on investment through changes in the share price, or dividends. It can be highly volatile and is considered one of the riskiest investments. High High Bonds Bonds are an instrument of borrowing. Bondholders have the first right to the assets of the company. Thus, these are considered safer than equity stocks. Also, a bondholder’s  return on investment  will be more stable than a stockholder's as bonds can have fixed coupon rates. Low Low M.Vadivel

9. Mutual Funds Mutual funds are pooled assets that are professionally managed. It can pool money from thousands of small investors and create a portfolio of up to 30 securities to generate a return on the pooled money. Mutual funds allow investors to invest a small amount regularly and choose their asset portfolio as per their risk profile. Medium Medium Unit Linked Insurance Plans ULIPs are  life insurance plans  that allow you to invest in diversified funds as per your risk profile. You will get market-linked returns and tax-saving benefits on your investments. Life cover will be available regardless of the performance of the invested sum. As per your portfolio High M.Vadivel

10. Gold Investing in physical gold could be expensive, risky, and fraught with storage issues. Thus, you can use an electronic form of gold investment. Gold ETFs and Gold Bonds are some of the popular ways of investing in gold and keeping up with its price. Medium Low Public Provident Fund (PPF) It is a scheme that offers a good rate of return and a sovereign guarantee. With  PPF  you can beat inflation, and build handsome wealth, that too completely tax-free. PPF also allows adequate liquidity. Thus, this investment helps you build a safety fund for your family. The account is extendable after 15 years of maturity. So, you can use it to save for your retirement and draw a tax-free pension after 60. Low Low M.Vadivel

11. Investment Option Liquidity Risk-Return Ideal Investment Term Savings Account Equal to Cash Almost Nil Nil Fixed Deposit Lower than Savings Higher than Savings 7 days to 10 years Gold High Medium 5 to 15 years Equity Stocks High Very High 3 to 30 years Equity Mutual Funds Medium to High High 5 to 10 years ULIPs Low Medium to High 5 to 81 years Public Provident Fund (PPF) Low Low (but tax-free) 15 years+ Real Estate Very Low Medium 10 years+ A ssets and investment options offer a different trade-off between these factors: M.Vadivel

12. Investment analysis Fundamental analysis; Technical analysis; Top-down analysis; Bottom-up analysis; Portfolio analysis; Security analysis. M.Vadivel

13. Fundamental analysis Fundamental analysis focuses most on the financial analysis and well-being of a company. This type of analysis helps search for stocks with significant potential for growth whose intrinsic value might have been negatively mispriced by the market. Technical analysis Technical analysis focuses on evaluating certain patterns of stock prices by relying on charts calculated by a computer. Technical analysts pay attention to price movements that indicate a pattern, trading signals, and other analytical charting tools that help identify the strengths and weaknesses of a security. M.Vadivel

14. Top-down analysis A top-down approach focuses on building a portfolio based on macroeconomic factors and market trends. Top-down investors evaluate investment opportunities based on their anticipation of stock market performance. Bottom-up analysis Bottom-up approach focuses on metrics related to specific companies. Bottom-up investors try to establish the financial health of a company by analyzing its financial statements. M.Vadivel

15. Portfolio analysis Portfolio analysis focuses on evaluating investments in a portfolio. You can use this type of analysis to determine the performance of a fund by comparing it to the benchmark index. Also, portfolio analysis allows seeing whether your funds are diversified in an appropriate way . Security analysis Security analysis focuses on determining the strength of a single investment. This type of analysis lays the fundamental ground for value investing, which revolves around buying assets that might be undervalued. M.Vadivel

16. Thanking You…. M.Vadivel