Introduction to investment to understand the meaning and definition with proper examples.

1. INVESTMENT MANAGEMENT

2. WHAT IS INVESTMENT
• An asset or item that is purchased with the hope that
it will generate income or appreciate in the future.
• In an economic sense, an investment is the purchase
of goods that are not consumed today but are used
in the future to create wealth.

3. • The building of a factory used to produce
goods and the investment one makes by going
to college or university are both examples of
investments in the economic sense.

4. • Investment is the sacrifice of certain present value
for the uncertain future reward.
• In finance an investment is a monetary asset
purchased with the idea that the asset will provide
income in the future or appreciate and be sold at a
higher price.

5. • Speculation is the practice of engaging in risky
financial transactions in an attempt to profit from
short or medium term fluctuations in the market
value of a tradable good such as a financial
instrument, rather than attempting to profit from the
underlying financial attributes embodied in the
instrument such as capital gains, interest, or
dividends.

6. Differences
Investment
• Comparatively long term
• Earnings of enterprise
• Small quantity
• Very stable income
• Investor is cautious and
conservative
• Scientific analysis of
intrinsic worth
• Ownership
• Outright purchase
Speculation
• Short time only
• Changes in market price
• Large
• Uncertain and erratic
• Daring and careless
• Hunches, tips, etc
• Not ownership
• Purchase on margin

7. Features of good investment
• Safety of principal
• Adequate liquidity and collateral value
• Stability of income
• Capital growth
• Tax benefits
• Purchasing power stability
• conceal ability

8. Investment process
• Investment policy
– Investible funds
– Objective
– Knowledge
 Analysis
 Market
 Industry
 Company

9. • Valuation
Intrinsic value
Future value
– Portfolio construction
diversification
selection and allocation
Portfolio Evaluation
Appraisal
Revision

10. Financial Instruments
• A real or virtual document representing a legal
agreement involving some sort of monetary
value.
• In today's financial marketplace, financial
instruments can be classified generally as
equity based, representing ownership of the
asset, or debt based, representing a loan
made by an investor to the owner of the asset.

11. Money Market Instruments
• Very short term Debt securities market
• Highly markatable
• Fixed income market
• Trade in large denominations
• Out of reach of individual investors

12. Treasury Bills
• Government raises money by selling bills to
the public.
• Investors buy the bills at a discount
• Face value is the maturity value
• Initial maturities were 91 days or 364 days
now 182 days also available in India.
• One month, Three months and six months in
US.
• Banks, Primary dealers, provident fund and
other investors can purchase

13. Specimen of UK TB

14. Certificate of Deposit
• It is time deposit with the bank
• CD’s are issued at discount
• Issued in denominations of Rs 100000
maturity value.
• These can be sold to another investor
• 14 days to one year
• For financial institutions its one year
• No advance can be taken and no limit

15. Specimen

16. Commercial paper
• These are debt instruments
• Highly rated companies in India can issue
• Now financial institutions can also raise short
term fund.
• 15 days to one year
• Multiple of 500000
• Issued at discount
• Banks are the major players in the primary
market.

17. REPOS (Repurchase Agreements)
• One party sells a security to another party
with an agreement to buy it back at a
specified time and price.
• Minimum period was 3 days now it is one day
• These are active between commercial banks.
• The difference between the sale and the buy
back price ids the interest cost

18. Bills rediscounting
• Bills discounting
• Rediscounting.

19. Call money markets
• Market for short term funds with maturity
period ranging between one day and 14 days.

20. Other
• Term money: Institutional borrowing
• Bank deposits
• Banker Acceptances
• Commercial bills.