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Investment Strategies and Processes Explained

This document discusses investment and securities. It defines investment as employing funds to earn income and capital appreciation over time, though returns are uncertain. Speculation aims for short-term gains by buying and selling based on price fluctuations. Investors plan for longer time horizons and assume moderate risk, while speculators seek high returns with very short holding periods and high risk. The investment process involves analyzing investible funds, objectives, markets, industries, companies, constructing a diversified portfolio, and evaluating performance.

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Praveen Kumar Sinha
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121 views7 pages

Investment Strategies and Processes Explained

This document discusses investment and securities. It defines investment as employing funds to earn income and capital appreciation over time, though returns are uncertain. Speculation aims for short-term gains by buying and selling based on price fluctuations. Investors plan for longer time horizons and assume moderate risk, while speculators seek high returns with very short holding periods and high risk. The investment process involves analyzing investible funds, objectives, markets, industries, companies, constructing a diversified portfolio, and evaluating performance.

Uploaded by

Praveen Kumar Sinha
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Investment and Securities

PRAVEEN KUMAR
Investment

It is the employment of funds on assets with the aim of earning


income and capital appreciation. It has two attributes:
 Time: present consumption is sacrificed to get the return in the
future.
 Risk: sacrifice to be borne is certain but the return in the future
is uncertain.
Economist: investment is the net addition made to the nation’s
capital stock that consist of goods and services that are used in
production process.
Financial investment: it is the allocation of money to asset that
are expected to yield some gain over a period of time.
Speculation

Speculation means taking up the business risk in the hope of


getting short term gain.
It essentially involve buying and selling activities with the
expectation of getting profit from the price fluctuations.
The time factor involved in speculation and investment is
different.
Speculator & Investor

Investor Speculator
Time horizon Plans for longer time Plans for very short
horozon. Holding period period. Holding period
may be from one year to may varies from few days
few years. to months.
Risk Assume moderate risk Willing to undertake high
risk.
Return Moderate return High return
Decision Considers fundamental Inside information,
factors and evaluates the market behavior.
performance of the
company regularly.
Funds Use his own funds. Use borrowed funds to
supplement his personal
resources.
Investment Objectives

Main objective:
 Increasing the rate of return: rate of return could be defined as the total
income the investor receive during the holding period stated as the
percentage of purchasing price at the beginning of the holding period.

return= (end value-beginning value)+ dividend *100


end value
Reducing the risk.

Other objective:
 Liquidity
 Safety
 Hedge against inflation.
Investment Process

The investment process involves a series of activities leading


to the purchase of securities or other investment alternatives.
The process can be divided into five stages:
a. Investment policy
a. 1.Investible funds
b. 2. objectives
c. 3. knowledge
b. Security Analysis
b. 1.market analysis
b. 2. Industry analysis
b. 3. Company analysis
Investment process cont…

c. Valuation
d. Portfolio construction
1. Diversification
2. Debt and equity diversification
3. Industry Diversification
4. Company Diversification
5. Selection

e. Portfolio evaluation
1. Appraisal
2. Revision

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