CHAPTER ONE ‘’ THE CONCEPT OF INVESTMENT in recent years, alternative investments have been introduced in c.

ts have been introduced in c. STOCK SELECTION - A stock selection strategy could be ideal
Investing – is a means of gradually increasing one’s wealth. The fund formats that bare accessible to retail investors. for investors looking to maximize gains. One can leverage those
fundamental tenet of investing is the expectation of a positive VI.OPTIONS and OTHER DERIVATIVES - Derivatives are financial perceived advantages without hedging or diversifying into
return in the form of income or statistically significant price instruments that derive their value from another instrument, different industries by purchasing stocks and placing them in a
appreciation. such as stock or index. portfolio based on their strengths.
The main goal of investing - is to create a profit over a Options contracts are popular derivative that gives the buyer the d. INVESTMENT MONITORING - Tracking investments and
predetermined time period or to acquire an additional source of right but not the obligation to buy or sell security at a fixed price measuring the portfolio’s performance compared to measurable
income. within a specific time period. Derivatives usually employ leverage, objectives is essential.
Investing is the process of buying financial assets with the making them a high-risk, high-reward proposition. e. Portfolio Strategy and Implementation- Must be able to select,
potential to increase in value while controlling risk and following VIICOMMODITIES - Commodities include metals, oil, grain and prioritize, and overseas programs and projects that adhere to the
a long-term investment strategy animal products, as well as financial instruments and currencies. organization’s strategic objectives and delivery capacity
What is Investing? They can either be traded through commodity futures- which are
- investing is the process of using money to invest for a agreements to buy or sell a specific quantity of a commodity at a
while in projects or endeavors with the goal of making specified price on a particular future date- or ETFs. Commodities
a profit (i.e., profits that surpass the amount of the can be used for hedging risk or for speculative purposes
initial investment)
- It is the process of distributing resources, most CHAPTER TWO ‘’INTRODUCTION TO INVESTMENT
commonly capital, or money, with the goal of making a MANAGEMENT’’
profit or achieving other objectives What is an Individual Investor? - ‘’An individual who purchases
• TYPES OF INVESTMENTS small amounts of securities for themselves, as opposed to an
I.STOCKS - A buyer of a company’s stock becomes a fractional Institutional Investors, also called as Retail Investor or Small
owner of that company. Owners of a company’s stock are known Investor’’
as its shareholder and can participate in its growth and success - They are also someone who invest in securities and
through appreciation in the stock price and regular dividends paid assets on their own, usually is smaller quantities.
out of the company’s profits. - They typically buy stocks in round numbers such as 25,
II.BONDS - Bonds are debt obligations of entities, such as 50, 75 or 100. The stocks they buy are part of their
government, municipalities, and corporations. Buying a bond portfolio and do not represent those of any
implies that you hold a share of an entity’s debt and are entitled organization. III. ADVANTAGES AND DISADVANTAGES OF INVESTMENT
to receive periodic interest payments and the return of the - They are also known as ‘’retail investors’’ , an MANAGEMENT
bond’s face value when it matures. professional investors who buys and sells securities or
III.FUNDS - Funds are pooled instruments managed by funds that contain a basket of securities ADVANTAGES DISADVANTAGES
investment managers that enable investors to invest in stocks, BOOST INCOME COSTLY
bonds, preferred shares, commodities, etc. • Return of capital Investment managers can Investment management
Two types of funds • Return on capital help to increase the services can be expensive
Mutual funds do not trade on an exchange and like, stocks, are • Liquidity income from an in the form of high expense
valued constantly throughout the trading day. investment portfolio by ratios and sales charges.
ETFs - trade on stock exchanges and, like stocks, are valued I. INVESTMENT MANAGEMENT - Investment management is the identifying investments
constantly throughout the trading day. practice of managing assets to achieve specified investment goals. with higher returns and
IV. INVESTMENT TRUSTS The assets in questions are frequently liquid or categorized as implementing strategies
- Trust are another type of pooled investment. Real Estate securities but can include other commodities to maximize income.
Investment Trusts (REIT’s) are one of the most popular in this II. INVESTMENT MANAGEMENT SERVICES - Investment
Minimizes Tax Liabilities Management Abuses
category. management services include managing portfolios of various
Investment managers can In some cases, investment
REITs invest in commercial or residential properties and pay investments such as stocks, bonds, mutual funds, and other
help minimize tax managers may abuse their
regular distributions to their investors from the rental income securities, to generate returns over the long term.
liabilities by reducing position and engage in
received from these properties. REITs trade on stock exchanges taxes on investment unethical or illegal
and thus offer their investors the advantage of instant liquidity. These services often offer a range of options to help clients
income and short term or practices, such as insider
V.ALTERNATIVE INVESTMENTS - Alternative investments is a achieve their financial goals, including:
long-capital gains. trading or misinterpreting
catch-all category that includes hedge funds and private equity. a. ASSET ALLOCATION - Asset allocation divides an investment
investment risks.
Hedge funds are so-called because they can hedge their portfolio among various asset categories, such as stocks, bonds,
Reduces Risks Volatile Investments
investments bets by going long and short on stocks and other and cash
Investment managers Investments in financial
investments. b. FINANCIAL STATEMENT ANALYSIS - Financial statement
can help to manage risk markets are subject to
- Private equity enables companies to raise capital without going analysis is an essential process that aids decision making.
in an investment volatility and can lose
public. Hedge funds and private equity were typically only External stakeholders gain insights into an organization’s overall
portfolio by diversifying value. Investment
available to affluent investors deemed ‘’accredited investors’’ health and value by examining a company’s financial statements.
investments and managers may be unable to
who met certain income and net worth requirements. However,
 implementing strategies prevent or mitigate losses
to reduce volatility. in all cases.
Outperforms the Market
Investment managers can
help to outperform the
market by actively managing
an investment portfolio and
making informed investment
decisions
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
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
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.
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 I.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
PROCESS OF PORFOLIO MANAGEMENT
1. Planning
• 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
• 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.
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
repay its debt on time.
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
Chapter FIVE: The Financial Market
Financial Market - is a place where securities and other financial
assets are bought and sold. It distributes scarce resources within
the country's economy
-refers broadly to any marketplace where securities trading
occurs, including the stock market, bond market, forex market,
and derivatives market
TYPES OF FINANCIAL MARKETS
• STOCK MARKETS - are among the most common financial
marketplaces. These are the platforms where businesses list their
shares for purchase and sale by investors and traders.
Brokers - are third parties that facilitates trades between buyers
and sellers but who do not take an actual position in a stock.
• OVER-THE-COUNTER MARKETS - An Over-the-counter (OTC)
market is a decentralized market – meaning it does not have
physical locations, and trading is conducted electronically- in
which market participants trade securities directly (meaning
without a broker).
• BOND MARKETS - A bond is a security in which an investor
loans money for a defined period at a pre-established interest
rate.
-a fixed- income instrument that represents a loan made by an
investor to a borrower typically corporate or government.
• MONEY MARKETS - The money market often deals in highly
liquid products with short maturities (less than a year) that offer
comparatively lower interest returns than other markets while
maintaining a high level of safety.
• MONEY MARKET ACCOUNTS
Pros
- Higher interest rate
- Safe and Insured
- Debit cards and checks
Cons
- Small Interest Earnings
- Higher Minimum Balance
- Limits on Monthly Transactions
• DERIVATIVES MARKETS - A Derivative is a contract between
two or more parties whose value is based on an agreed-upon
underlying financial assets (like security) or set of assets (like an
index).
- a derivative is a financial security with a value that is
reliant upon, or derived from, an underlying asset or
a group of assets
✓ Stocks
✓ Bonds
✓ Commodities
✓ Currencies
✓ Interest Rates
✓ Market indices
• FOREX MARKET - The FOREX Market (Foreign Exchange Market)
is where participants can buy, sell, hedge, and speculate on the
exchange rates between currency pairs. The forex market is the
most liquid market in the world, as cash is the most liquid of
assets.
• COMMODITIES MARKETS - Commodities markets are venues
where producers and consumers meet to exchange physical
commodities such as agricultural products (e.g., corn, livestock,
soybeans) energy products (oil, gas, carbon credits), precious
metals (gold, silver, platinum), or soft commodities (such as
cotton, coffee and sugar)
Through an Initial Public Offering (IPO), businesses can sell shares
of themselves to the general public in order to raise the necessary
funds.
The Initial Public Offering (IPO) also offers early investors in the
company an opportunity to cash out part of their stake, often
reaping very handsome rewards in the process.
INITIAL PUBLIC OFFERING PROCESS
Step 1 : Proposal Creation
Step 2 : Underwriting Selection
Step 3 : Team Assembly
Step 4 : SEC Filings
Step 5 : Road Show Marketing
Step 6 : Pricing
Step 7 : Trading
Step 8 : Post – IPO
7 Functions Of Financial Markets
1.Price Discovery – Decides the worth of an asset
2. Fund Mobilization – Raising funds for expanding services
3. Market Efficiency – Information available in the financial
market
4. Liquidity – Provides liquidity for buying and selling
5. Risk Sharing – Manage risk with derivatives trading
6. Capital Formation – Increment in the productive asset stocks
7. Intermediary – Facilities transactions between buyers and
sellers
Chapter SIX: The Stock Market capitalization of its listed companies with billions of trades III. NORTH ASIA
happening daily.
HOW DOES STOCK MARKET WORKS? 3. National Association of Securities Dealers Automated
• The PRIMARY MARKET - is where securities are created, and a Quotations (NASDAQ) NASDAQ is an electronic marketplace EXCHANGE LOCATION FOUNDED LISTING
company list their shares through an IPO or so called Initial Public based in the United States and is focused on high technology
MOSCOW MOSCOW, 2011 219
Offering. An IPO is when a company first list their shares publicly. listings. It is ranked second on the list of stocks exchanges by
EXCHANGE RUSSIA
• The SECONDARY MARKET, - which is essentially the stock market capitalizations of shares traded behind NYSE.
exchange, is where the supply and demand of these shares (along
with the thousands of other stocks on the market) are bought, I. CENTRAL ASIA
IV. SOUTHEAST ASIA
sold, and traded every day.
EXCHANGE LOCATION FOUNDED LISTING
WHY INVEST IN THE STOCK MARKET?
Investment Gains – primary benefits of investing in the stock KAZAKHSTAN ALMATY, 1993 127
market is the chance to grow your money STOCK KAZAKHSTAN
Diversification – for investors who put money into different types EXCHANGE LOCATION FOUNDED LISTING
EXCHANGE
of investment products
KRYGYZ BISHKEK, 1994 NOT INDONESIA JAKARTA, 1912 833
Dividend Income – some stocks provide income in the form of a
STOCK KYRGYZTAN INDICATED STOCK INDONESIA
dividenf, those that do deliver annual payments to investors
EXCHANGE EXCHANGE
Ownership – buying share of stock means taking on an ownership
strake in the company you purchase stock in CENTRAL DUSHANBE, 2015 NOT
ASIAN STOCK TAJIKISTAN INDICATED
LAOS VIENTIANE, 2011 11
The Stock Market serves two important purposes. EXCHANGE
SECURITIES LAOS
- First, it helps companies raise money often referred to as capital TASHKENT TASHKENT, 1994 104 EXCHANGE
from the public by offering shares for sale, which can be used to STOCK UZBEKISTAN
fund and expand their business. EXCHANGE
-Second, it gives an investor, who purchases those shares, an BURSA KUALA 1964 801
opportunity to have a share in the company’s profits II. EASTERN ASIA MALAYSIA LUMPUR,
-Investors can profit from owning stocks in one of two ways. MALAYSIA
Some stocks pay regular dividends (a given amount of money per
share) at regular intervals which provides a return on the amount EXCHANGE LOCATION FOUNDED LISTING
of money invested in the shares. Alternatively, a return can also SHANGHAI SHANGHAI, 1990 2061 MYANMAR YANGON, 1996 NO
be earned through capital appreciation which is when the stock STOCK CHINA SECURITIES MYANMAR T INDICATED
price increases. EXCHANGE EXCHANGE
CENTRE
HONG KONG HONG KONG 1891 2,538
STOCK
EXCHANGE
PHILIPPINE MANILA, 1927 329
TOKYO STOCK TOKYO, JAPAN 1878 1,838 STOCK PHILIPPINES
EXCHANGE EXCHANGE
MACAO MACAU 2018 NOT
FINANCIAL INDICATED
ASSET SINGAPORE SINGAPORE 1999 776
EXCHANGE EXCHANGE

MONGOLIAN ULAANBAATAR, 1991 NOT

STOCK BANGKOK, 1975 614
STOCK MONGOLIA INDICATED
EXCHANGE OF THAILAND
EXCHANGE
COMMONLY KNOWN STOCK EXCHANGE IN NORTH AMERICA THAILAND
1. TORONTO STOCK EXCHANGE (TSX) Located in Toronto CHOSUN STOCK SEOUL, SOUTH 1943 2,354
Canada. It is the 9th largest exchange in the world by market EXCHANGE KOREA
HO CHING HO CHING 2000 396
capitalization. A wide range of companies from Canada and all TAIWAN STOCK TAIPEI, 1961 898 MINH STOCK MINH CITY,
over the world are listed on this exchange. EXCHANGE TAIWAN EXCHANGE VIETNAM
2. NEW YORK STOCK EXCHANGE (NYSE) It is an American Stock
Exchange in the Financial District of Lower Manhattan in New
York City and is the world’s largest stock exchange by market V. SOUTHERN ASIA
 stock market- is where securities such as HOW TO INVEST IN THE STOCK MARKET
stocks and bonds are bought and sold. The
EXCHANGE LOCATION FOUNDED LISTING 1. Decide what kind of account you
stock market helps expert investors decide fair
AFGHANISTAN KABUL, 2009 NOT prices for public companies and gives want to open.
STOCK AFGHANISTAN INDICATED individuals simple, transparent access to 2. Open a brokerage account
EXCHANGE investment assets.
3. Deposit money
WHO REGULATES THE STOCK MARKET? 4. Choose your investments
CHITTAGONG CHITTAGONG, 1995 293 5. Purchase your investments
The Securities and Exchange Commission (SEC)
STOCK BANGLADESH regulates the stock market in the United
EXCHANGE
States. The SEC was created after the passing
of the Securities Act of 1993, following the
ROYAL THIMPHU, 1993 20 stock market crash of October 1929. SEC
SECURITIES BHUTAN regulations cover four main areas:
EXHANGE
BHUTAN 1. STOCK EXCHANGES
2. BROKER AND DEALERS

BOMBAY STOCK MUMBAI, 1875 5,300

3. FINANCIAL ADVISORS
EXCHANGE INDIA 4. MUTUAL FUNDS

IRAN FARA TEHRAN, IRAN 2008 547 Other Types of Market

BOURSE
1. OVER THE COUNTER MARKETS (OTC)
PAKISTAN KARACHI, 2016 540 OTC Markets provide a venue for trading that takes place outside
STOCK PAKISTAN of major exchanges. OTC trades are primarily made directly
EXCHANGE
between sellers and buyers, and prices may or may not be
publicly available. Most bonds are traded OTC, and many stocks-
VI. WESTERN ASIA including penny stocks are also traded over the counter.

2 COMMODITIES MARKETS
EXCHANGE LOCATION FOUNDED LISTING
Raw materials like steel, coal and oil are traded on commodities
TEL AVIV STOCK TEL AVIV, 1953 473 markets. There are around 50 major commodity markets
EXCHANGE ISRAEL worldwide that facilitate trade in a wide range of commodities.

3. DERIVATIVES
AMMAN STOCK AMMAN, 1999 NOT
EXCHANGE JORDAN INDICATED Derivative are financial contracts like options whose value is tied
to an underlying asset. These are essentially contractual bets
BOURSA SAFAT, KUWAIT 1977 NOT about whether individual securities value will rise of fall.
KUWAIT INDICATED
4. FOREIGN EXCHANGE MARKETS
BEIRUT STOCK BEIRUT, 1920 NOT
FOREX Trading is borderless, international market for exchanging
EXCHANGE LEBANON INDICATED
currencies. FOREX Traders take advantage of the constantly
fluctuating value of different currencies to make profits, and help
TADAWUL RIYADH, 2007 202 provide liquidity for international trade.
KINGDOM OF
SAUDI ARABIA 5. CRYPTOCURRENCIES

Bitcoin, Ethereum and other cryptocurrencies are traded on

ABU DHABI ABU DHABI, 2000 73 specialized crypto exchanges.
SECURITIES UNITED ARAB
MARKET EMIRATES