Investment mgnt. lilian b. salan


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Investment Management

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Investment mgnt. lilian b. salan

  1. 1. InvestmentManagement By: Lilian B. Salan
  2. 2. Investment management is the professional management of various securities (shares, bonds and other securities) and assets (e.g., real estate) in order to meet specifiedinvestment goals for the benefit of the investors.
  3. 3. Investors may be institutions(insurance companies, pension funds, corporations, charities, educational establishments etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or exchange-traded funds).
  4. 4. Bank Deposits Money placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts at a banking institution,such as savings accounts, checking accounts and money market accounts.
  5. 5. Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of aloss, from one entity to another, in exchange for payment.
  6. 6. Real Estate Land plus anything permanently fixed to it, including buildings,sheds and other items attached to the structure.
  7. 7. Corporate securityaims at protecting Knowledgeassets, whether in the form ofphysical entities or intellectual (tangible and intangible) property.
  8. 8. Stock market or equity market is a public entity (a loose network ofeconomic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stockexchange as well as those only traded privately.
  9. 9. Investing in the Stock Market A share of stock is evidence of afractional ownership in a corporation. Buying a share of common stock is in fact buying a share of a business. An individual who owns shares in, say, Petron or PLDT has an ownershipinterest in that company and is called a stockholder or shareholder.
  10. 10. Philippine GovernmentSecurities (locally referred to as "GS")are theunconditional debt obligations of the Republic of the Philippines. These are all denominated in the local currency, the Philippine peso. The securities are issued by the Republic through its fiscal agent, the Bureau of Treasury.
  11. 11. Problem in Investment Whether you make or lose money in the stock market depends on how well your investments perform. All investing involves risk. Investors who lose money just because the market “went down” can’t blame their stockbrokers.But if you lose money because of fraud orabuse by an investment professional, you may be able to recover your related losses.
  13. 13. Risk is an inherent part of investing.Generally, investors must takegreater risks to achieve greaterreturns. Those who do not toleraterisk very well have a relatively smallerchance of making high earnings thando those with a higher tolerance forrisk.
  14. 14. There are various types of riskPersonal RisksThis category of risk deals with thepersonal level of investing. Theinvestor is likely to have more controlover this type of risk compared toothers.
  15. 15. Timing risk is the risk of buying the rightsecurity at the wrong time. It also refersto selling the right security at the wrongtime. For example, there is the chancethat a few days after you sell a stock itwill go up several dollars in value. Thereis no surefire way to time the market.
  16. 16. Tenure risk is the risk of losing moneywhile holding onto a security. Duringthe period of holding, markets may godown, inflation may worsen, or acompany may go bankrupt. There isalways the possibility of loss on thecompany-wide level, too.
  17. 17. Company RisksThere are two common risks on the company-widelevel. The first, financial risk, is the danger that acorporation will not be able to repay its debts. Thishas a great affect on its bonds, which finance thecompanys assets. The more assets financed bydebts (i.e., bonds and money market instruments),the greater the risk. Studying financial risk involveslooking at a companys management, itsleadership style, and its credit history.
  18. 18. Management risk is the risk that acompanys management may run thecompany so poorly that it is unable togrow in value or pay dividends to itsshareholders. This greatly affects thevalue of its stock and the attractivenessof all the securities it issues toinvestors.
  19. 19. Market RisksFluctuation in the market as a wholemay be caused by the following risks:Market risk is the chance that the entiremarket will decline, thus affecting theprices and values of securities. Marketrisk, in turn, is influenced by outsidefactors such as embargoes and interestrate changes.
  20. 20. Liquidity risk isthe risk that aninvestment, whenconverted tocash, willexperience loss inits value.
  21. 21. Interest rate risk is the risk that interestrates will rise, resulting in a currentinvestments loss of value. Abondholder, for example, may hold abond earning 6% interest and then seerates on that type of bond climb to 7%.
  22. 22. Inflation risk is thedanger that the dollarsone invests will buy lessin the future becauseprices of consumergoods rise. When therate of inflation rises,investments have lesspurchasing power.
  23. 23. Exchange raterisk is the chancethat a nationscurrency will losevalue whenexchanged forforeign currencies.
  24. 24. Reinvestment risk is the dangerthat reinvested money will fetchreturns lower than those earnedbefore reinvestment. Individualswith dividend-reinvestment plansare a group subject to this risk.Bondholders are another.
  25. 25. National and International RisksNational and world events canprofoundly affect investment markets.
  26. 26. Economic risk is the danger thatthe economy as a whole willperform poorly. When the wholeeconomy experiences adownturn, it affects stock prices,the job market, and the prices ofconsumer products.
  27. 27. Industry risk is the chance that aspecific industry will perform poorly.When problems plague one industry,they affect the individual businessesinvolved as well as the securities issuedby those businesses. They may alsocross over into other industries. Forexample, after a national downturn inauto sales, the steel industry maysuffer financially.
  28. 28. Tax risk is the danger that risingtaxes will make investing lessattractive. In general, nations withrelatively low tax rates, such as theUnited States, are popular placesfor entrepreneurial activities.
  29. 29. Businesses that are taxed heavilyhave less money available forresearch, expansion, and evendividend payments. Taxes are alsolevied on capital gains, dividends andinterest. Investors continually seekinvestments that provide the greatestnet after-tax returns.
  30. 30. Political risk is the danger thatgovernment legislation will have anadverse affect on investment. This canbe in the form of high taxes,prohibitive licensing, or theappointment of individuals whosepolicies interfere with investmentgrowth.
  31. 31. Political risks include wars,changes in governmentleadership, and politicallymotivated embargoes.
  32. 32. References: