Fe 9 Reviewer
Sir Xerez Singson
Investment
Employment of fund on assets with the aim of earning income or capital
appreciation.
Financial activity by people with savings.
“commitment of funds made in the expectation of some positive rate of
return”
Financial & Economic meaning
Financial:
Commitment of person’s fund to derive future income in the form of interest, dividend,
pension benefit or appreciation in the value of their capital.
Ex. purchase of shares, debentures, post office savings certificates etc.
These investments generate financial assets.
Economic:
Net additions to the economy’s capital stock – goods. & services that are used in the
production of other goods and services.
Eg:-new constructions, plant & machinery, inventories Etc.…..
These investments generate physical assets.
“All investment results in the acquisition of some assets either
FINANCIAL or physical”
Real Assets
Assets which are tangible or physical in nature
Real assets
Other tangible
Real Estates
Assets
Real Estates
Residential land, building apartments, farm land etc.
Other Tangible Assets
Precious metal like gold, silver, platinum.
Precious stones like diamonds, colored stones, antiques
Financial Assets
An intangible asset that derives value because of a contractual claim eg;
stocks, bonds, bank deposits etc.
Characteristics Investment
Return
Risk
Liquidity
Safety
Contribution to capital formation
Objectives…
✓ Maximization of Return
✓ Minimization of Risk
✓ Tax minimization
✓ Liquidity
Speculation
Buying and selling of securities within a very short period of time (less than one
year)
Speculator
Need capital gain only
Eg; a person who buy a security at 9’o clock and sell at 9:30 for the quick gain (may be
loss)
Gambling
Taking high risk not only for high return but also for thrill and excitement.
Unscientific and unplanned
Based on tips and rumors
Eg; Horse race, lotteries, and games etc.
Investors
Individual investors
Institutional investors
Individual investors
Large number
Investible resources are smaller
Lack of extensive evaluation and analysis
Eg; Mr. A purchase the shares of X limited
Institutional Investors
Organization which surplus funds who engage in investment activities
Fewer in numbers
Investible resources are much larger
Professional approach
Eg; mutual funds, insurance companies etc.
1. Framing investment Policy
I. Investible funds
II. Objectives
III. Knowledge
2. Investment/security Analysis
I. Market analysis
II. Industry analysis
III. Company analysis
3. Valuation
I. Intrinsic value
II. Future value
4. Portfolio Construction
I. Diversification
a) Debt and Equity diversification
b) Industry diversification
c) Company diversification
II. Selection
5. Portfolio Evaluation
I. Appraisal
II. Revision
Investment Alternatives
Equity Shares
Shares na binibili
Deposits
Bank deposits, time deposits
Bonds and Debentures
Money market instruments
Treasury bills
Certificate deposits
Commercial paper
Insurance products
Types of insurance plan
Term assurance plan
Traditional investment linked plan
Unit-Linked insurance plan (ULIPS)
Retirement Products
1. Mandatory retirement schemes
I. Employees’ Provident Funds (EPF) scheme
II. Employees’ Pension Schemes
III. New pension schemes
2. Voluntary retirement schemes
Precious objects
1. Precious metals
Gold, silver, etc.
2. Precious stones
Diamonds, colored stones, etc.
3. Art objects and collectibles
Paintings, antiques, etc.
Real estates
Agricultural land, semi-urban land, commercial property, etc.
Mutual Funds
Invest in three broad categories of financial assets in stocks, bonds and cash
Three broad categories of mutual fund schemes
a) Equities scheme
b) Hybrid scheme
c) Debt scheme
Financial Derivatives
Futures and
Options
