Define Investment?

An investment is an asset or item acquired with the goal of generating income or

appreciation. In finance, 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

Attributes of investment

 Rate of Return
 Marketability
 Risk
 Tax shelter
 Capital Growth
 Purchasing power stability
 Stability of Income

Investment Process

 Set investment policy

 Perform security analysis
 Construct a Portfolio
 Portfolio revision
 Evaluate performance

Types of Mutual Funds

 Open-ended Scheme
 Close-ended Scheme
 Equity Fund
 Debt Fund
 Load Funds
 No load Funds
 Hybrid Funds
 Liquid Funds
 Fund of Funds
 INVESTMENT ALTERNATIVES

Financial form/Assets Non-financial form/ Real Assets

Marketable Non-Marketable Real-Estate Precious Objects

Equity Shares Fixed deposits Residential house Gold &Silver

Preference Share Gilt edged securities Commercial property Precious Stones

Debenture Post office deposits Agricultural land Art Objects

Bonds Company provident fund Sub urban land

Convertible Securities Public provident fund Holiday resort

Hybrid Securities Mutual funds

Financial Derivatives Insurance

Other deposits

Money market instruments

Difference between Systematic Risk Vs Unsystematic Risk

BASIS FOR SYSTEMATIC RISK UNSYSTEMATIC RISK

COMPARISON

1. Meaning Systematic risk refers to the Unsystematic risk refers to the risk
hazard which is associated with associated with a particular
the market or market segment as a security, company or industry.
whole.

2. Nature Uncontrollable Controllable

3. Factors External factors Internal factors

4. Affects Large number of securities in the Only particular company.

market.

5. Types Interest risk, market risk and Business risk and financial risk
purchasing power risk.

6. Protection Asset allocation Portfolio diversification

Different between Investment and Speculation

BASIC DIFFERENCE INVESTMENT SPECULATION

1. Meaning The investment of money A massage expressing an
opinion based on incomplete
evidence
2. Types of contracts Investor is a creditor of the Speculator is an owner of the
investment speculation
3. Length commitment In the case of investment the In the case of speculation the
length of commitment is a length of commitment is a
long term short term only
4. Source of income The source of income is The source income is
earning from the enterprise fluctuated and changes in
market price
5. Quantity of risk Quantity of is the low Quantity of risk is the high
6. Stability of income Income is very stable Income is uncertain and
erratic
7. Psychological attitude Investor’s psychological Speculator psychological
of participants attitude is a caution and attitude is a daring and
conservative careless
8. Reasons for purchase It is scientific analysis of It is unscientific analysis of
intrinsic worth intrinsic worth

What is a 'Rights Issue’?

A right offering is a group of rights offered to existing shareholders to purchase additional

stock shares, known as subscription warrants, in proportion to their existing holdings. In a
rights offering, the subscription price at which each share may be purchased is generally
discounted relative to the current market price. Rights are often transferable, allowing the
holder to sell them in the open market.

What is 'Book Building'?

Book building is the process by which an underwriter attempts to determine the price to place
a securities offering, such as an initial public offering (IPO), based on demand from
institutional investors. An underwriter builds a book by accepting orders from fund managers,
indicating the number of shares they desire and the price they are willing to pay.
What is 'Underwriting'?

Underwriting is the process by which investment bankers raise investment capital from
investors on behalf of corporations and governments that are issuing either equity or debt
securities. The word "underwriter" originated from the practice of having each risk-taker
write his name under the total amount of risk he was willing to accept at a specified premium.

What is 'Underwriter'?

An underwriter is any party that evaluates and assumes another party's risk for a fee, such as
a commission, premium, spread or interest. Underwriters operate in many aspects of the
financial world, including the mortgage industry, insurance industry, equity markets, and
common types of debt securities.

What is 'Behavioral Finance'?

Behavioral finance, a sub-field of behavioral economics, proposes psychology-based theories

to explain stock market anomalies, such as severe rises or falls in stock price. The purpose is
to identify and understand why people make certain financial choices.

Methods of raising funds

 Issue of share
 Issue of debentures
 Loan from financial institutions
 Loan from commercial banks
 Public deposits
 Reinvestment of profits

Factors to b considered to enter the primary market

 Economic factor
 Social and cultural factor
 Political and legal factor
 Market attractiveness
 Capabilities of the company
Major participants in securities market

 Stock exchange
 Mutual funds
 Listed securities
 Depositories
 Brokers
 Foreign institutional investor’s
 Merchant bankers
 Primary dealers
 Custodians
 Registrars
 Underwriters
 Venture capital funds
 Credit rating agencies

Types of bonds

 Premium bonds
 Discount bonds
 Convertible bonds
 Mortgage bonds
 Yield bonds
 Fixed income bonds
 Government bonds
 Corporate bonds
 Municipal bonds