Introduction to Securities

Investment
•Investment is parting with one’s fund, to be used by another party,
user of fund, for productive activity
•For e.g. Loans, advances, Contribution to Equity or debt

•Investment means conversion of money into monetary asset or a

claim on future money for a return..

Characteristics of Investment

•Risk
•Return
•Safety
•Liquidity
•Marketability
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Security

The term "security" refers to a fungible, negotiable financial

instrument that holds some type of monetary value. It
represents an ownership position in a publicly-traded
corporation via stock; a creditor relationship with a
governmental body or a corporation represented by owning
that entity's bond; or rights to ownership as represented by
an option.

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Portfolio
A portfolio is a collection of financial investments like stocks,
bonds, commodities, cash, and cash equivalents, including closed-
end funds and exchange traded funds (ETFs). People generally
believe that stocks, bonds, and cash comprise the core of a
portfolio. Though this is often the case, it does not need to be the
rule. A portfolio may contain a wide range of assets including real
estate, art, and private investments.
You may choose to hold and manage your portfolio yourself, or
you may allow a money manager, financial advisor, or another
finance professional to manage your portfolio.

Portfolio Management
Portfolio management is the art and science of selecting and
overseeing a group of investments that meet the long-term financial
objectives and risk tolerance of a client, a company, or an institution. 2
Investment and Speculation
Investment is when a security or an asset is purchased with an intention of holding it
for a long term period with a view that it will gradually increase in value over that
period and speculation can be considered a more risk based transaction where the
sole purpose is to make profit out of that transaction which is generally a short term
and often a single transaction.

Both these terminologies are generally used synonymously due to specific common
characteristics, but it does have a line of demarcation to distinguish them.

In simple terms, investment involves purchasing an asset or security with the hope it
will generate certain returns in the future. Speculation, on the other hand, involves
an element of risk in a financial transaction and how sufficient profits can be earned
from the same.

Investment is spread over a long time horizon, and the focus is on getting security
and stable returns, whereas speculated activities are for activities for less than one
year. In speculation, the objective is to make quick returns and may compromise on
the objective of security. 2
Security Analysis

Security analysis refers to the method of analyzing the value of

securities like shares and other instruments to assess the total value of
business which will be useful for investors to make decisions.

Features
•To value financial instruments like equity, debt, and warrants of a
company.
•To use publicly available information.
•Security analysts must act with integrity, competence, and diligence
while conducting the investment profession.
•To use various analytical tools, this includes fundamental, technical,
and quantitative approaches.
•Security analysts should place the interest of clients above their
personal interests.
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Types of Securities

•Equity
•Debt
•Hybrid
•Derivative

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