Group Members1. Elita Almeida2.Sangeeta Bandekar3. Nainaz Bi4. Aniksha Braganza5. Asleema D’Costa6. Jonlen DeSa
Presentation Path Meaning of InvestmentSpeculation and GamblingObjectives of InvestmentFeatures of InvestmentNeeds of InvestmentTypes of InvestmentsTypes of InvestorsComparative study on types of investmentInvestment AvenuesInvestment ProcessConclusion
INVESTMENT Definition In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. Meaning Investment is the employment of funds on assets with the aim of earning income or capital appreciation Investment has two attributes namely time and risk. Present consumption is sacrificed to get a return in future.
SPECULATIONSpeculation means taking up the business risk in the hope of getting short term gain.Speculation essentially involves buying and selling activities with the expectation of getting profit from the price fluctuations.
Gambling and InvestmentA gamble is usually a very short term investment in a game or chanceGambling is different from speculation and investmentThe time horizon involved in gambling is shorter than speculation and investment
OBJECTIVES OF INVESTMENT1.Return Rate of Return defined as the total income that the investor receives during the holding period. Stated semi-annually or annually. Return =End period value – Beginning period value + Dividend___________________________________________ Beginning period valueFor Ex. If a particular share is purchased in 1998 at Rs.50, disposed at Rs.60 in 1999 and the dividend yield is Rs.5, then the return would be calculated as;
2. Risk Related with the probability of actual return Investment risk is as important as measuring its expected rate of return.3. Liquidity Marketability of the investment. Depends on the marketing and trading facility4. Hedge against Inflation The return rate should be higher than the rate of inflation.5. Safety Investment avenues should be under the legal and regulatory framework. Approval of law itself adds a flavour of safety.
FEATURES OF INVESTMENT1. Safety of Principal-• The safety sought in investment is not absolute or complete.• Diversify the securities.• Limiting investment.• Holding different media at the same time.2. Adequate liquidity and collateral value-• An investment is a liquid asset.• Every investor must have a sound portfolio.3. Stability of income-• Security of Principal• An investor must consider stability of monetary income and stability of purchasing power of income.
4 Capital growth-Principle of capital appreciation.Seeking “Growth Stocks”5 Tax benefits-Tax status costly to the investors.6 Purchasing power stabilityObjective of receiving greater units of future funds.Investor has to maintain purchasing power stability.
NEED OF INVESTMENT To keep the value of your money from inflation. To get a good return from your ideal money. To satisfy your future financial goals Provideenough money for meeting uncertain future needs
Types of Investments Autonomous Investment Investment Financial Investment Real Investment Planned Investment Unplanned Investment Gross Investment Net Investment
Types of investors A. Individual investors Individual investors purchase securities in their individual capacity. They have surplus money and are interested in investing the same in the corporate sector.1. Conservative investors: Conservative investors tend to be risk averse.2. Moderately Conservative: Moderately conservative investors are willing to take on some amount of risk.3. Moderately Aggressive: Moderately aggressive investors usually have similar investment objectives as aggressive investors.
Aggressive: Aggressive investors commonly do most of their investing in the stock market which is highly risky. Active investors: Active investors, are those who have achieved significant wealth, or earned well, during their own lifetime. Emotional investors: Emotional - easily attracted to fashionable investments. Busy investors: Busy investors - these investors need to be involved with the markets Casual investors: Casual investors - a laid-back attitude to investment, these individuals are often hardworking and involved with work or family.
B. Institutional investors Institutional investors are investment agencies with surplus money to invest in securities. Institutional investors are of two types: Private Public
a. Private InvestorsCommercial Banks: A commercial bank is one which transacts the business of banking such as the accepting deposit for the purpose of lending.Insurance Company: Insurance is a form of risk management primary used to hedge against the risk of a contingent, uncertain loss.Charitable Trusts: A legal arrangement where by real or personal property is placed in trust for the benefit of a charity
b . Public Investors IDBI: IDBI plays a very important role as an institutional investor and assists all types of industrial concerns engaged in the manufacture, processing, mining by investing in these industries as per their requirements. (U.T.I) :The Unit Trust of India is a statutory public sector investment institution established under the Unit Trust of India Act, 1963. I.F.C.I.) :The primary role of IFCI is to provide ‘direct financial assistance’ on medium and long term basis to industrial projects in the corporate and co-operative sectors.
Investment avenue LIFE INSURANCE POLICY (LIC) Life insurance is a contract for payment of a sum of money to the person assured on the happening of event insured against. PUBLIC PROVIDENT FUND SCHEME It is a long term, government backed small saving scheme of the Central Government. Interest is calculated on the lowest balance between the fifth day and the last day of the calendar month and is credited to the account on 31st march every year.
NATIONAL SAVINGS CERTIFICATENational Savings Certificate is available for purchase or issue of at all Post Offices in India.There is no maximum limit for purchase of the certificate. MUTUAL FUNDopen ended schemesclose ended schemes
FIXED DEPOSITS Itrefers to a savings account or certificate of deposit that pays a fixed rate of interest until a given maturity date. EQUITY LINKED SAVING SCHEME (ELSS) Equity Linked Saving Scheme is a kind of mutual fund like diversified equity funds with tax benefits. Itis a mutual fund that has to invest a minimum of 80% in equity shares. The balance 20% can be in debt, money market instruments, cash or even more equity.
INFRASTRUCTURE BONDS The infrastructure bonds will have maturity of 10 years and lock-in period of 5 years. investment decisions in the infrastructure bonds are affected by Inflation and Interest rates EQUITY SHARES Investing in equities is a good long term options as the returns on equity over a long time horizon are generally higher than most other investment avenues.
National Savings CertificateNational Savings Certificate is available for purchase or issue of at all Post Offices in India.There is no maximum limit for purchase of the certificate. Mutual Fundopen ended schemesclose ended schemes
DEBENTURESItis a written instrument acknowledging a debt under the common seal of the company GOLDInvestors generally buy gold as a hedge or safe haven against any economic, political, social or fiat currency crisis.
1.Investment PolicyThe investor formulates the policy for systematic functioning. Its essential ingredients are:1.Investible Funds-Availability of funds ie savings or borrowings for investment.2.Objectives-Main objective of investment is to earn return, need for regular income & liquidity.3.Knowledge-Investor should have adequate knowledge of investment alternatives, avenues, risk associated, returns, operations of stock exchanges and brokers.
2.Security Analysis Once the investment policy is formulated, then the securities have to be scrutinized through:1.Market analysis-GDP & inflation growth are reflected in stock prices. Stock prices fluctuate in short run, but move in trends in the long run.2.Industry Analysis-Industries contribute a lot of output as well as to the economic growth.3.Company analysis- it helps the investor make better decisions. Co’s earnings, profitability, operating efficiency, capital structure & mgmt must b screened.
3.Investment ValuationValuation helps the investor determine the return and risk expected from the investment. There are 2 values:1.Intrinsic Value-It is measured through the book value of the share & P/E ratio.2. Future Value- It is measured using Trend analysis.
4. Portfolio Construction A portfolio is a combination of securities. It is made in such a way to meet the investors goals & objectives.1. Diversification-Its main objective is to reduce risk. There are several ways to diversify the portfolio: Debt& Equity Diversification Company Diversification2.Selection-Based on the diversification level & the various analysis, the security is selected. Funds are allocated to the selected securities & the construction of portfolio is sealed.
5.Portfolio EvaluationThe portfolio has to be managed efficiently. It consists of 2 steps:1.Appraisal- The stocks have to be appraised. It warns the loss & steps can be taken to prevent the loss.2.Revision-Revision depends on the result of the appraisal. The low yielding risky securities are replaced with high yielding less risk securities.
CONCLUSIONInvestment is the employment of funds on assets or other securities with the aim of earning income or capital appreciation. Investments have 3 attributes namely time, return and risk.Investors should take proper precautions while investing in any avenues
BIBLIOGRAPHYReferences Security analysis and portfolio management- Punithavathy Pandian Business Finance- N.G. Kale Investment and Securities Market in India- VA. Avadhani Securities Analysis and Portfolio Management- Donald. E. Kisher and Ronald J. Jordan Investment Management- V.K. Bhalla Websites www.sharetipsinfo.com www.younginvestor.com www.ameritrade.com www. moneycentral.msn.com