Investment Management

1. INVESTMENT MANAGEMENT
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2. Investment
“Commitment of
funds made in the
expectation of
some positive
rate of return”
Investment is the
employment of
funds with the
aim of achieving
additional income
or growth in value
Expectation of
return is an
essential element
of investment.
Investment is defined as a sacrifice made now to
obtain a return later. It is current consumption
that is sacrificed.
Two forms of investment can be defined
◦ Real investment is the purchase of land,
machinery, etc.
◦ Financial investment is the purchase of a
"paper" contract
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3. OBJECTIVES OF INVESTMENT
Maximization of return
Minimization of risk
Capital appreciation
Tax considerations
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4. FEATURES OF INVESTMENT
RISK
RETURN
SAFETY
LIQUIDITY
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5. INVESTMENT VS SPECULATION
Risk : Normally risk involved in investments either loss of profit or lower profit than expected.
Speculation is a baseless guess and may result in a very high profits or high loss. The risk in case of
speculation is very high.
Capital gain : The motive of investment is achievement of appreciation.
The motive of speculation is achievement of profits through price changes.
Time : If securities are purchased and investor does not expect an immediate return on it and waits for long
term benefit, it is termed as investment.
If a person expects immediate returns on his investment and dispose of it in a short period, it is
known as speculation.
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7. MEANING OF INVESTMENT MANAGEMENT
Investment management refers to the handling of financial assets and other investments—not only
buying and selling them.
Management includes developing a short- or long-term strategy for acquiring and disposing of
portfolio holdings. It can also include banking, budgeting, and tax services and duties, as well.
The term most often refers to managing the holdings within an investment portfolio, and their trading
is done to achieve a specific investment objective.
Investment management is also known as money management, portfolio management, or wealth
management.
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8. INVESTMENT MANAGEMENT
Professional investment management aims to meet particular investment goals for the benefit of
clients whose money they have the responsibility of overseeing.
These clients may be individual investors or institutional investors.
Investment management services include :
 asset allocation,
 financial statement analysis,
 stock selection,
 monitoring of existing investments,
 and portfolio strategy and implementation.
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9. INVESTMENT MANAGEMENT
Investment management may also include financial planning and advisory services, not
only overseeing a client's portfolio but coordinating it with other assets and life goals.
Professional managers deal with a variety of different securities and financial assets,
including bonds, equities, commodities, and real estate.
The manager may also manage real assets such as precious metals, commodities, and
artwork. Managers can help align investment to match retirement and estate planning as
well as asset distribution.
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10. SCOPE OF INVESTMENT MANAGEMENT
Identification of Investors’ Requirements
Formulation of Investment Policy and Strategy
Execution of strategy
Monitoring of Portfolio
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11. CLASSIFICATION
Companies issue different type of instrument/securities for collecting funds. Depending upon the
different types of investor companies issue different types of instrument/securities and it
deepened on the nature of return or claim. Financial assets may be classified as:
a) Equity share/instrument/MF/insurance /gold/commodities.
b) Debt instrument like debenture, bonds or term loan.
c) Preference share
On the basis of financial issuer, financial assets /securities are classified as,
1) Primary securities or direct securities.
2) Secondary securities or indirect securities.
3) Derivatives
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12. ON THE BASIS OF FINANCIAL ISSUER, FINANCIAL ASSETS
/SECURITIES ARE CLASSIFIED AS:
PRIMARY SECURITIES: - this type of securities is called 'direct securities'. As the name suggest
these types of securities are issued directly by the ultimate borrower to the ultimate sever or
investors. Equity Shares, preference shares, debenture, bounds under this, such types of
securities comes.
SECONDARY SECURITIES :-As the name suggest, secondary securities are the securities which are
not issued directly by ultimate borrower, these securities are issued by financial intermediaries to
the ultimate saver or investor like insurance policy, unit of mutual funds, bank deposit etc. that's
why secondary securities is called 'indirect securities'.
DERIVATIVES: - Derivatives are the financial instruments whose value is derived from the value of an
underlying finance instrument such as a treasury bill, a bond or a note an individual equity. The
financial derivatives include forwards, futures operation, swaps, warrants or a mix of these. The
important types of financial assets such as shares, debentures, hybrid securities.
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13. RISK RETURN TRADE-OFF
The principal that potential return rises with an increase in risk. Low levels of uncertainty (low risk)
are associated with low potential returns whereas high levels of uncertainty (high risk) are
associated with high potential returns.
The trade off which an investor faces between risk ad return while considering investment decisions
is called Risk Return Trade-off.
Ex: Mr. Rohan faces a risk return trade-off while making his decision to invest. If he deposits all his
money in a SB account, he will earn a low return, but all his money will be insured up to an amount of
Rs. 1 Lakh. The risk return spectrum also called the risk return trade-off which is the relationship
between the amount of return gained on an investment and the amount of risk undertaken in that
investment. The more return sought, the more risk that must be undertaken.
There is always a risk incorporated in every investment like shares or debentures. The two major
components of risk systematic risk and unsystematic risk, which when combined results in total risk.
The systematic risk is a result of external and uncontrollable variables, which are not security
specific and affects the entire market leading to the fluctuation in prices of all the securities.
On the other hand, unsystematic risk refers to the risk which emerges out of controlled and known
variables, that are industry or security specific
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14. ELEMENTS OF RISK
1. Systematic risk
Interest rate risk
Market risk
Purchasing power /Inflation risk
2. Unsystematic risk
Business risk
Financial risk
Operational risk
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18. PORTFOLIO MANAGEMENT
A portfolio can be defined as different investments tools namely stocks, shares, mutual funds,
bonds, cash all combined together depending specifically on the investor’s income, budget, risk
appetite and the holding period. It is formed in such a way that it stabilizes the risk of
nonperformance of different pools of investments.
Portfolio management is the art of selecting the right investment tools in the right proportion to
generate optimum returns with a balance of risk from the investment made.
Objectives of Portfolio Management
Capital Growth
Security of Principal Amount Invested
Liquidity Marketability of Securities Invested in
Diversification of Risk
Consistent Returns
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19. PHASES OF PORTFOLIO MANAGEMENT
Security
analysis
Portfolio
analysis
Portfolio
selection
Portfolio
revision
Portfolio
evaluation
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20. VIDEO LINK FOR SYSTEMATIC & UNSYSTEMATIC RISKS
https://youtu.be/GrE9rkLvObs
All content of this PPT is taken from various sources available on internet.
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