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Summary 1.

The common target of investment activities is to “employ” the money (funds) during the time period seeking to enhance the investor’s wealth. By foregoing consumption today and investing their savings, investors expect to enhance their future consumption possibilities by increasing their wealth. 2. Corporate finance area of studies and practice involves the interaction between firms and financial markets and Investments area of studies and practice involves the interaction between investors and financial markets. Both Corporate Finance and Investments are built upon a common set of financial principles, such as thepresent value, the future value, the cost of capital). And very often investment and financing analysis for decision making use the same tools, but the interpretation of the results from this analysis for the investor and for the financier would be different. 3. Direct investing is realized using financial markets and indirect investing involves financial intermediaries. The primary difference between these two types of investing is that applying direct investing investors buy and sell financial assets and manage individual investment portfolio themselves; contrary, using indirect type of investing investors are buying or selling financial instruments of financial intermediaries (financial institutions) which invest large pools of funds in the financial markets and hold portfolios. Indirect investing relieves investors from making decisions about their portfolio. 4. Investment environment can be defined as the existing investment vehicles in the market available for investor and the places for transactions with these investment vehicles. 5. The most important characteristics of investment vehicles on which bases the

common stock. The investment management process describes how an investor should go about making decisions. The main types of financial investment vehicles are: short. which includes following stages: (1) setting of investment policy. Generally. with shortage. 9.overall variety of investment vehicles can be assorted are the return on investment and the risk which is defined as the uncertainty about the actual return that will be earned on an investment. All securities are first traded in the primary market. individual investors do not haveaccess to secondary markets. Investment management process can be disclosed by five-step procedure. They use security brokers to act as intermediaries for them. who buy securities. and financial market in which only long-term financial instruments are traded is Capital market. who issue new securities or sell existing securities. to those. Secondary market . (4) portfolio revision.term investment vehicles. other investment tools. Financial market. (3) formation of diversified investment portfolio. fixed-income securities. and the secondary market provides liquidity for these securities. speculative investment vehicles. (2) analysis and evaluation of investment vehicles.where previously issued securities are traded among investors. In financial markets funds are channeled from those with the surplus. is Money market. Primary market is where corporate and government entities can raise capital and where the first transactions with the new issued securities are performed. . 7. (5) measurement and evaluation of portfolio performance. 8. Financial markets are designed to allow corporations and governments to raise new funds and to allow investors to execute their buying and selling orders. 6. in which only short-term financial instruments are traded. Each type of investment vehicles could be characterized by certain level of profitability and risk because of the specifics of these financial instruments.

Timing involves macro forecasting of price movements of particular type of financial asset relative to fixed-income securities in general. The other constrains which investment policy should include and which could influence the investment management are any liquidity needs. timing and diversification are the most important issues in the investment portfolio formation.10. projected investment horizon and preferences of the investor. 11. . formed by the investor seeking to realize its’ defined investment objectives. Selectivity. Diversification involves forming the investor’s portfolio for decreasing or limiting risk of investment. Selectivity refers to micro forecasting and focuses on forecasting price movements of individual assets. Investment portfolio is the set of investment vehicles. Investment policy includes setting of investment objectives regarding the investment return requirement and risk tolerance of the investor.