CHAPTER ONE ‘’ THE CONCEPT OF INVESTMENT REITs invest in commercial or residential properties and pay Institutional Investors, also
Institutional Investors, also called as Retail Investor or Small
Investing – is a means of gradually increasing one’s wealth. The
fundamental tenet of investing is the expectation of a positive
return in the form of income or statistically significant price
appreciation.
The main goal of investing - is to create a profit over a
predetermined time period or to acquire an additional source of
income.
Investing is the process of buying financial assets with the
potential to increase in value while controlling risk and following a
long-term investment strategy
What is Investing?
- investing is the process of using money to invest for a
while in projects or endeavors with the goal of making
a profit (i.e., profits that surpass the amount of the
initial investment)
- EEBNIt is the process of distributing resources, most
commonly capital, or money, with the goal of making a
profit or achieving other objectives
• TYPES OF INVESTMENTS
I. STOCKS - A buyer of a company’s stock becomes a fractional
owner of that company. Owners of a company’s stock are known
as its shareholder and can participate in its growth and success
through appreciation in the stock price and regular dividends paid
out of the company’s profits.
II. BONDS - Bonds are debt obligations of entities, such as
government, municipalities, and corporations. Buying a bond
implies that you hold a share of an entity’s debt and are entitled
to receive periodic interest payments and the return of the
bond’s face value when it matures.
III. FUNDS - Funds are pooled instruments managed by
investment managers that enable investors to invest in stocks,
bonds, preferred shares, commodities, etc.
Two types of funds
Mutual funds do not trade on an exchange and like, stocks, are
valued constantly throughout the trading day.
ETFs - trade on stock exchanges and, like stocks, are valued
constantly throughout the trading day.
IV. INVESTMENT TRUSTS
- Trust are another type of pooled investment. Real Estate
Investment Trusts (REIT’s) are one of the most popular in this
category.
regular distributions to their investors from the rental income
received from these properties. REITs trade on stock exchanges
and thus offer their investors the advantage of instant liquidity.
V. ALTERNATIVE INVESTMENTS - Alternative investments is a
catch-all category that includes hedge funds and private equity.
Hedge funds are so-called because they can hedge their
investments bets by going long and short on stocks and other
investments. - Private equity enables companies to raise capital
without going public. Hedge funds and private equity were
typically only available to affluent investors deemed ‘’accredited
investors’’ who met certain income and net worth requirements.
However, in recent years, alternative investments have been
introduced in fund formats that bare accessible to retail investors.
VI. OPTIONS and OTHER DERIVATIVES - Derivatives are financial
instruments that derive their value from another instrument, such
as stock or index. Options contracts are popular derivative that
gives the buyer the right but not the obligation to buy or sell
security at a fixed price within a specific time period. Derivatives
usually employ leverage, making them a high-risk, high-reward
proposition.
VII. COMMODITIES - Commodities include metals, oil, grain and
animal products, as well as financial instruments and currencies.
They can either be traded through commodity futures- which are
agreements to buy or sell a specific quantity of a commodity at a
specified price on a particular future date- or ETFs. Commodities
can be used for hedging risk or for speculative purposes
ESSENTIAL NOTES RELATING TO INVESTING
• Investing involves deploying capital (money) toward projects or
activities that are expected to generate a positive return over
time.
• The type of return generated depends on the type of project or
asset; real estate can produce both rents and capital gains; many
stocks pay quarterly dividends; bonds tend to pay regular interest.
• In investing, risk and return are two sides of the same coin, low
risk generally means low expected returns, while higher returns
are usually accompanied by higher risk.
• Investors can take the do-it-yourself approach or employ the
services of a professional money manager.
• Whether buying a security qualifies as investing or speculation
depends on three factors- the amount of risk taken, the holding
period, and the source of returns.
CHAPTER TWO ‘’INTRODUCTION TO INVESTMENT
MANAGEMENT’’
What is an Individual Investor? - ‘’An individual who purchases
small amounts of securities for themselves, as opposed to an
Investor’’
- They are also someone who invest in securities and
assets on their own, usually is smaller quantities.
- They typically buy stocks in round numbers such as 25,
50, 75 or 100. The stocks they buy are part of their
portfolio and do not represent those of any
organization.
- They are also known as ‘’retail investors’’ , an
professional investors who buys and sells securities or
funds that contain a basket of securities
 Return of capital
 Return on capital
 Liquidity
I. INVESTMENT MANAGEMENT - Investment management is the
practice of managing assets to achieve specified investment goals.
The assets in questions are frequently liquid or categorized as
securities but can include other commodities
II. INVESTMENT MANAGEMENT SERVICES - Investment
management services include managing portfolios of various
investments such as stocks, bonds, mutual funds, and other
securities, to generate returns over the long term.
These services often offer a range of options to help clients
achieve their financial goals, including:
a. ASSET ALLOCATION - Asset allocation divides an investment
portfolio among various asset categories, such as stocks, bonds,
and cash
b. FINANCIAL STATEMENT ANALYSIS - Financial statement
analysis is an essential process that aids decision making. External
stakeholders gain insights into an organization’s overall health
and value by examining a company’s financial statements.
c. STOCK SELECTION - A stock selection strategy could be ideal for
investors looking to maximize gains. One can leverage those
perceived advantages without hedging or diversifying into
different industries by purchasing stocks and placing them in a
portfolio based on their strengths.
d. INVESTMENT MONITORING - Tracking investments and
measuring the portfolio’s performance compared to measurable
objectives is essential.
e. Portfolio Strategy and Implementation- Must be able to select,
prioritize, and overseas programs and projects that adhere to the
organization’s strategic objectives and delivery capacity

III. ADVANTAGES AND DISADVANTAGES OF INVESTMENT
MANAGEMENT
ADVANTAGES
BOOST INCOME
Investment managers can
help to increase the income
from an investment
portfolio by identifying
investments with higher
returns and implementing
strategies to maximize
income.
Minimizes Tax Liabilities
Investment managers can
help minimize tax liabilities
by reducing taxes on
investment income and
short term or long-capital
gains.
Reduces Risks
Investment managers can
help to manage risk in
an investment portfolio by
diversifying investments and
implementing strategies to
reduce volatility.
Outperforms the Market
Investment managers can
help to outperform the
market by actively managing
an investment portfolio and
making informed
investment decisions.
DISADVANTAGES
COSTLY
Investment management services
can be expensive in the form of
high expense ratios and sales
charges.
Management Abuses
In some cases, investment
managers may abuse their
position and engage in unethical
or illegal practices, such as insider
trading or misinterpreting
investment risks.
Volatile Investments
Investments in financial markets
are subject to volatility and can
lose value. Investment managers
may be unable to prevent or
mitigate losses in all cases.
IV. OPERATING AN INVESTMENT MANAGEMENT COMPANY
Starting your investment firm can be quite profitable. You can
succeed with proper preparation, execution, and hard effort.
1. SELECT A NAME FOR YOUR INVESTMENT COMPANY
- The first step in establishing your investment firm is to select a
unique business name.
2. Create a Business Plan for your Investment Company
- Developing your plan guarantees you thoroughly understand
your market and strategy. The strategy also includes a road map
for you to follow and, if necessary, submit to funding sources to
raise funds for your firm.
3. Choose your Investment Company’s Legal Structure
- Select a business structure for your investment firm and register
it, as well as your business name, with the Secretary of State in
each state where you do business.
4. Obtain Start up Capital for your Investment Company
- Personal savings, family and friends, credit card financing, bank
loans, crowdsourcing and angel investors are the primary sources
of finance for an investment firm to consider.
5. Choose a location for your company
- When looking for a place for your investment firm, finding a
location that will benefit your organization is critical such as a city
with a robust economy receptive to new enterprises.
6. Register your Investment Company with the Internal Revenue
Service (IRS)
-You must register your company with the IRS, which result in the
IRS awarding you an Employer Identification Number (EIN)
7. Establish a Business Bank Account
- Opening a bank account in the name of your investing
organization is critical.
8. Apply for a Business Credit Card
- To help you separate personal and company costs, you could
obtain a corporate credit card for investing firm.
9. Obtain the necessary Business Licenses Permits
- To establish an investing firm, you must first register with the
Securities and Exchange Commission (SEC) and obtain the
necessary state securities license.
10. Purchase Commercial Insurance for your Investment
Company
-The sort of insurance required to run your investment firm is
determined by the type of business you run.
11 . Purchase or Lease the appropriate Investment Company
Equipment
You will need a computer, a phone, an internet connection, and
promotional materials to establish your own investment
company.
12. Create Marketing Materials for your Investment Company
- You will need marketing materials to acquire and retain clients
for your investment firm.
13. Purchase and Install the software the required to
run your investment firm
You will need a financial analysis program to make
informed selections regarding which stock markets to
invest in.
14. Open for Business
- You are now prepared to start your investment firm.
Chapter Three: Portfolio Management
Portfolio Mnagement – 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
Active Portfolio management - requires strategically
buying and selling stocks and other assets in an effort
to beat the performance of the broader market.
Passive portfolio management- seeks to match the
returns of the market by mimicking the make up of an
index or indexes.
MAIN PORTFOLIO MANAGEMENT TYPES Portfolio Management:
PASSIVE vs ACTIVE i. PASSIVE MANAGEMENT - Is the long-term
set-it-and-forget-it approach. Purchasing one or more exchange-
traded fund (ETF) index funds could be part of it. This is
sometimes known as index investment or indexing. Modern
portfolio theory (MPT) can assist those who construct indexed
portfolios in optimizing the mix. ii. ACTIVE MANAGEMENT -
Involves actively purchasing and disposing of individual stocks and
other assets in an effort to outperform an index. Generally
speaking, closed-end funds are actively managed.
Discretionary Management - This type of portfolio management
allows professionals to make decisions about a client's holdings
without the need for ongoing authorization from the investor.
Non-Discretionary Management - This approach requires the
investor to be actively involved in every decision, including what
investments are bought and sold.

KEY ELEMENTS OF PORTFOLIO MANAGEMENT I. ASSET
ALLOCATION - refers to the placement of assets within
various accounts, such as tax-advantaged or taxable
accounts. is based on the understanding that different types of
assets do not move in concert, and some are more volatile than
others. A mix of assets provides balance and protects against risk
II. DIVERSIFICATION - Involves spreading the risk and reward of
individual securities within assets class, or between asset classes.
III. REBALANCING - It is used to return a portfolio to its original
target allocation at regular intervals, usually annually. This is done
to reinstate the original asset mix when the movements of the
markets force it out of kilter.
IV. TAX-EFFICIENCY - A potentially material aspects of portfolio
management relates to how your portfolio is shaped to minimize
taxes in the long term. This pertains to how different retirement
accounts are used, how long securities are held on for, and which
securities are held.
PROCESS OF PORFOLIO MANAGEMENT
1. Planning
 Portfolio Selection - This involves an investor deciding
which assets to include in their portfolio. It requires
balancing risk and return expectations while
accounting for external factors, such as inflation
and taxes, to ensure a favorable outcome.
 Portfolio Implementation - Poorly timed and managed
portfolio executions can result in significant transaction
costs. When executing a portfolio, it is essential to
consider both explicit and implicit costs.
3.Feedback
 Monitoring and Rebalancing - A portfolio
manager should regularly monitor and evaluate
risk exposures within the portfolio to rebalance it
according to the strategic asset allocation.
 Performance Evaluation - Evaluating a portfolio
using absolute and relative returns gives a
complete picture of its strengths and
weaknesses.
Chapter FOUR: Risk and Return of Investment
Financial Risk and Return - in investing are perhaps the most
crucial parameters considered by investors while choosing an
investment option
Risk - can be defined as the uncertainty related to the investment,
market, or company. Investors want profits, and the risks can
potentially reduce the profits, sometimes even making a loss for
them.
repay its debt on time. This will lead to good credit rating. Credit
risk is the result of deteriorating financial health of the company.
iv. Liquidity Risk- This is the result of the business not being able
to earn good revenue to meet its financial obligations and
maintain high working capital.
v. Interest Risk Rate – The fluctuation in the interest rates in an
economy can affect the business’s borrowing capacity. vi.
Inflation- The inflation leads to erosion of value of the cash flow in
future.
TYPES OF RETURN
i. Capital gains- The value of any wise investment will increase
over time. Therefore, if the assets are sold later on, their worth
will be higher than their acquisition price, resulting in a capital
gain.
ii. Dividends- they are a steady source of income for investors
who invest in shares of companies giving regular dividends which
are a part of the profits set aside for investors.
iii. Interest- Borrowers like individuals or corporates borrow
money for meeting expenses or capital requirements. The lenders
give the funds to get interest on the principal amount which is a
return on investment for the lenders. iv. Rental Income- Any
property rented out can earn rent on a regular basis, which is also
a return in the real estate property.
v. Return from currency trading- Profits earned from trading in
exchange rates by using the difference is exchange rate of
different currency is also a form of return for those who do
currency trading.

 Identification of Objectives and Constraints - Identify
the investment objectives, which refer to any desired
outcomes for the client regarding return and risk.
 Investment Policy Statement - Draft an
effective investment policy statement that provides
valuable direction for investors' resource allocation
decisions.
 Capital Market Expectations - To help investors assess
the potential investment returns and determine the
long-term outlook, formulate expectations for risk and
return of various asset classes.
 Asset Allocation Strategy - There are two strategies to
consider here, strategic and tactical. A strategic asset
allocation strategy is a long-term strategy that
necessitates regular rebalancing to ensure you do not
deviate from your goals
2. Execution
Return on investment, or ROI. - It can be defined as the monetary
profits from making a particular investment. Individuals should
ideally favor investments that yield larger returns, such as equities
of companies like Google, Amazon, etc
Risk and Return in Financial Management
High risk – High returns
Low risk – Low returns
• TYPES OF RISK
i. Market Risk – It is also called systematic risk and arise due to
various market related factors like economic and political
problems, interest rate and currency fluctuations, etc
ii. Specific Risks – They are related mostly to company itself. They
may be controlled through diversification a monitoring.
iii. Credit Risk – This is related to credit worthiness of the
company or business. If the financial conditions of the business is
good, it will be able to meet its current and future obligations and