What is investment?

• Investment is the commitment of funds in

the acquisition of financial assets for
securing a flow of income/capital
appreciation while keeping the risk within
manageable limits
 Objectives of investment
management
• Maximize Return
• Minimize Risk
• Keep Liquidity
• Reduce Tax liability
 Investment media
• Fixed principal investment-cash saving
account,savings certificates,Government
bonds.debentures
• Variable principal investments-equity
shares , preference shares, convertible
debentures
• Indirect investments- pension funds, mutual
funds.provident funds, insurance
 Features of good investment
• Safety of principal
• Liquidity
• Income stability
• Appreciation and purchasing power
stability
• Legality and freedom from care
• tangibility
 Process of investment
• Investment policy
• Investment valuation
• Investment analysis
• Portfolio construction
• Portfolio evaluation and revision
 Investment policy
• Determination of investible wealth
• Determination of portfolio objectives
• Identification of potential investment assets
• Consideration of attributes of investment
assets
 Investment valuation
• One must determine the intrinsic value of a
security and compare it with its market
value so as to decide whether to invest or
not.
 Investment analysis
• Fundamental analysis consisting of
economy analysis, industry analysis and
company analysis
• Technical analysis to determine the
appropriate time for buying or selling
 Portfolio construction
• Determination of risk return consideration
• Determination of diversification level
• Consideration of investment timing
• Selection of investment assets
• Allocation of funds to investment assets
Portfolio evaluation and revision
• Evaluation of portfolio
• Diagnosing reasons for favourable/
unfavourable performance
• Making appropriate changes in the portfolio