2. Investment & Portfolio Management 2
An investment is simply any asset into which funds can be
placed with the expectation that it will generate positive
income and/or increase its value, and
A collection of different investments is called a portfolio.
The rewards, or returns, from investing come in two basic
forms: income and increased value.
3. Investment & Portfolio Management 3
Property consists of investments in real property
or tangible personal property.
Real property refers to land, buildings, and that
which is permanently affixed to the land.
Tangible personal property includes items such as
gold, artwork, antiques, and other collectibles.
Property is not as easy to buy or sell as are
securities, so we would say that property
tends to be a relatively illiquid type of
investment.
5. Debt is simply a loan that obligates the borrower to make
periodic interest payments and to repay the full amount of
the loan by some future date
Equity represents on-going ownership in a business or
property. An equity investment may be held as a security or
by title to a specific property. The most common type of
equity security is common stock.
Derivative securities Derivative securities are neither debt
nor equity. Instead, they derive their value from an
underlying security or asset. Stock options are an example
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6. Trade-off between risk and return
to obtain higher returns, investors usually have to accept
greater risks. Low-risk investments provide a relatively
predictable, but also relatively low, return. High-risk
investments provide much higher returns on average, but
they also have the potential for much larger losses
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