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Investment Analysis and Portfolio Management: Unit - I
Investment Analysis and Portfolio Management: Unit - I
Portfolio Management
Unit - I
Investment
• It is the employment of funds with the aim of achieving
additional income (interest, dividend , rent, pension, etc…) or
growth in the value(capital appreciation).
diligence for mid to long period of time, with the objective of wealth
assets”
For example, deploying funds on horse racing, game of cards, lottery, etc.
Investment Avenues
• Bank Deposits – Savings, Recurring and Fixed deposits
• Equity Shares
• Bonds or debentures
• Return
• Risk
• Liquidity
• Tax Benefits
markets.
World Equity Market
capitalization.
the Netherlands
• The New York Stock Exchange (NYSE) is first on the list of the largest
in the USA which is situated at Wall Street, New York City. It was
Investors
Individual /Retail Investors
Intermediaries
Merchant bankers, Stock exchange, Stock Brokers, Depositories, Credit rating
agencies, SEBI, etc.
Retail/Individual Investors
• SEBI law defines retail individual investor as an
in a stock.
retail investor.
Cont…
• They purchase securities for their personal accounts and
often trade in much lower amounts compared with
institutional investors like mutual funds, pension funds
like EPFO or foreign institutional investors.
investors.
money.
Pension Funds
Pension funds or retirement funds help investors to accumulate their part of savings
over a long-term period so that they can have a steady flow of income after
retirement.
• Plans that are sponsored by an insurer where the investment is solely in debt and
• Plans that are unit-linked and invest in both equity and debt.
• The National Pension System (NPS) is also considered as one of the best
investment tools for retirement. It is a voluntary contribution scheme.
• NPS offers three options of investment to its investors: equity, corporate debt,
and government bonds.
• Portfolio Diversification
• Liquidity
• Tax benefits
• Transparency
• Now, the investment experts in the insurance company will calculate the
probability of insurance claims every year and the long-term returns from a pool
guidelines.
• To ensure that funds in insurance companies are invested
responsibly, the insurers must follow the Insurance
Regulatory and Development Authority (Investment)
(Amendment) Regulations, 2001 by the IRDA. These
guidelines control the degree of the investments by insurers.
• For example, the insurers offering life-insurance plans must
invest their controlled funds in Government Securities and
other approved funds not less than 50%.
• The freedom to choose the investment route is given to the
experts of the insurance companies.
Endowment Funds
• A pooled fund of money (or gifted property), the principal of which is
which are in line with the institute’s vision, and the remaining part is
• https://
economictimes.indiatimes.com/markets/stocks/news/endowment-funds
Banks
• A bank is a financial institution that
accepts deposits from the public and creates credit.
• Lending activities can be performed either directly or
indirectly through capital markets.
• Due to their importance in the financial stability of a
country, banks are highly regulated in most countries.
Hedge Funds
assets.
general public.
Constraints in Investment
• Liquidity Constraints
• Time Constraints
• Tax Constraints
• Legal Constraints
• Other Constraints
https://
analystnotes.com/cfa-study-notes-describe-the-i
nvestment-constraints-of-liquidity-time-horizon-
tax-concerns-legal-and-regulatory-factors-and-u
nique-circumstances-and-their-implications-for-t
he-choice-of-portfolio-assets.html
Interest Rates
• Interest rates determine the amount paid by borrowers
(debtors) for holding money from lenders (creditors).
• These rates are usually expressed as a percentage of an
amount paid for a period of one year, however, they are
also sometimes calculated over shorter periods.
• Offered interest rates vary from product to product and
from bank to bank, with a number of factors contributing
to the rate of interest.
Cont…
• The interest is the price paid by the bank for leaving the
money with them for a fixed period of time.
• The interest charged on the loan will be pegged to the base rate,
• With changes in the base rate, the interest charged on the loan will
also vary.
• Mostly the Changes, if any, in the interest rate during the tenor of
the loan will not affect the EMI; instead, the tenor of the floating
• Published since 1986, the S&P BSE SENSEX is regarded as the pulse of the
• The base value of the SENSEX is 100 and its base year as 1978–79.
NIFTY
• Full form of NIFTY is National Index Fifty.
• It represents the weighted average of top 50 Indian company stocks listed in NSE from 13
sectors.
• The base period for the CNX Nifty index is 1995 and the base value is 1000 and a base
• NSE Indices Limited also offers several other stock indexes with the NIFTY in the name that
• Other broad-based indexes (NIFTY 100, NIFTY Mid-Cap 50, NIFTY Small Cap 50, etc.)
• Sector-based indexes (NIFTY Auto, NIFTY Media, NIFTY Bank, NIFTY Pharma, NIFTY Realty,
etc.)
Foreign Market Indices
Some famous security market indices in the US are:
• Dow Jones Industrial Index (DJIA), which is a group of 30 stocks of the largest American
corporations
• Standard & Poor's Composite 500 Index (S&P 500), which comprises about 500 stocks
• DAX (Germany)
• FTSE (U.K.)
• Nikkei (Japan)
• TSX (Canada)