Meaning of Investment

1. Investment
RUBY SHARMARUBY SHARMA

2. What is Investment
• An instrument that promises some certain or
uncertain return in the future.
• Process of using money (called capital) to buy an
asset that will generate a safe and acceptable return
over time.
• Investment means willing to take some risk and
putting your money in instruments with potential of
higher returns.
RUBY SHARMARUBY SHARMA

3. WHAT IS INVESTMENT ?
“Investment may be defined as the purchase by an individual or
institutional investor of a financial real asset that produces a return
proportional to the risk assumed over some future investment period.
“An investment is a commitment of funds made in the expectation of
some positive rate of return.” If the investment is properly undertaken,
the return will be commensurate with the risk the investor assumes”
RUBY SHARMARUBY SHARMA

4. ONE NEEDS TO INVEST TO.
EARN RETURN ON YOUR IDLE RESOURCES
GENERATE A SPECIFIED SUM OF MONEY FOR A
SPECIFIC GOAL IN LIFE
MAKE A PROVISION FOR AN UNCERTAIN FUTURE
ONE OF THE IMPORTANT REASONS WHY ONE NEEDS TO INVEST
WISELY IS TO MEET THE COST OF INFLATION. INFLATION IS THE
RATE AT WHICH THE COST OF LIVING INCREASES.
Why should one invest?
RUBY SHARMARUBY SHARMA

5. INVESTMENT, SPECULATION AND GAMBLING
Basis Investment Speculation Gambling
1.Plannin
g
Horizon
Longer Very short Very very short
2.Risk
Dispositio
n
Investor normally
not willing to assume
more than moderate
risk
Assumes higher
risk
Just for fun, risk
created artificially.
3.Return
Expectati
on
Moderate return with
limited risk
High returns
with high risk
Risk without any
commensurate
economic return
4.Basis
for
Decision
Greater significance
to fundamental
analysis
Technical charts
& market
psychology
Nothing
5.Leverag
e
Investor uses his
own funds and
eschews borrowed
funds
Normally resorts
to borrowings
which can be
substantial to
supplement his
personal
resources
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RUBY SHARMARUBY SHARMA

6. Features of an Investment
Programme
1.Safety of Principal
2.Liquidity
3.Income Stability
4. Appreciation and Purchasing Power Stability
5. Legality and Freedom from Care
6. Tangibility
7. Tax Benefits
RUBY SHARMARUBY SHARMA

7. Individual and institutional investors
Investor
Retail
(Individual)
Institutional
Insurance
Company
Depository
Institutions
Banks
Pension Funds
Investment
Companies &
Mutual Funds
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8. Investment Cycle
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9. A person, company, etc., That seeks the advice of a
professional man or woman a person depending on
another's patronage
how to know the investor?
Gain the personnel information of client.
Find the need of the investor.
Financial status of investor.
Time period investor is having to achieve that goal.
Understand the risk appetite of the investor.
Client Profile
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10. Objective should vary from person to person.
Like
daughter marriage.
Building dream home.
Children education.
Objective of investment should be ethical.
Both for long term and short term.
AS WE KNOW THERE ARE THREE TYPES OF
INVESTOR
conservative, moderate, aggressive
Objective and Risk analysis.
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11. Differences
Basis Conservative Moderate Aggressive
1.Extent
of Risk
Little Risk Fair amount of risk
of capital loss.
High Risk.
2.Level of
Return
Low level Slow and steady
growth in value
High
Return
3.Current
Income
Moderate current
income
Seek slow capital
gains and some
current income
-
4.Goal Capital
preservation
Asset accumulation Capital
Appreciatio
n
5.Risk
Tolerance
Risk Averter Moderate risk taker. Risk seeker
Contd.
RUBY SHARMARUBY SHARMA

12. Basis Conservative Moderate Aggressive
6.Investme
nt period
Long-term No immediate need
for funds.
Long-term
and short
term
7.Tactics Selling investments
when price rise 15%
Selling investments
when price rise in
25% Purchasing
investments when
price rise is 25%
Long term and
short term
tactics.
8.Diversific
ation
Spreads funds among
large number of
investment alternatives.
Spreads funds among
large number of
investment
alternatives.
Does not
diversity
much.
9.Avenues
of
investment
Government bonds high
quality corporate bonds,
balanced mutual funds,
certificate deposits.
Dividend paying
equity shares growth
income mutual fund,
high quality corporate
bonds, government
bonds, real estate
Equity shares
of new fast
growing
companies,
highly yielding
junk bonds.
RUBY SHARMARUBY SHARMA

13. Analysis of market and economic condition is very
important .
various economic and market factor
Inflation .
Different rates.
Historical market trend.
Performance of particular scheme where you are
going to invest.
Etc……….
Economic and Market analysis
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14. A systematic approach to investing among different
categories of investments. It determine the best way
to divide investable assets into the various types of
asset classes:
diversification :
investing in a number of different investments, to
reduce the overall risk of investments.
Asset Allocation
RUBY SHARMARUBY SHARMA

15. After doing all now select the investment which fulfill
your objective , goals, need, time and risk and than
implement it.
Investment selection and
Implementation
RUBY SHARMARUBY SHARMA

16. Investment Avenues
1) Bank deposits
2) P.O. Deposits
3) Co. Deposits
4) P.F. Deposits
INVESTMENT
AVENUES
1) Govt. Securities
2) PSU Bonds
3) Debentures
1) Equity schemes
2) Debt schemes
3) Balanced schemes
1) Agricultural land
2) Semi Urban land
3) Holiday Resorts
FINANCIAL
DERIVATIVES
1) Gold and silver
2) Precious Stones
3) Art objects
1) Endowment Plan
2) Money Back Policy
3) Whole life policy
4) Premium back
5) Term assurance
1) Treasury Bills
2) Commercial papers
3) CDs
1) Blue Chip Cos.
2) Growth shares
3) Income shares
4) Cyclical Shares
5) Speculative shares
NON-MKTABLE
FINANCIAL
ASSETS
BONDS
MUTUAL
FUND
SCHEMES
REAL
ESTATE
EQUITY
SHARES
MONEY
MARKET
INSTRUMENTS
LIC
POLICIES
PRECIOUS
OBJECTS
Futures Options
RUBY SHARMARUBY SHARMA

17. EVALUATION OF VARIOUS
INVESTMENT AVENUES
Return Capital
Appreciati
on
Risk
Liquidity
Marketability Tax
Shel
ter
Conven-
ience
Equity Shares Low High High Fairly High Yes High
Non-convertible
Debentures
High Negligible Low Average Nil High
Equity Schemes Low High High High Yes Very high
Debt Schemes High Low Low High Yes Very high
Bank Deposits Moderate Nil Negligible High Yes Very high
PPF Nil High Nil Average Yes Very High
Life Insurance Nil Moderate Nil Average Yes Very High
Residential House Moderate Moderate Negligible Low Yes Fair
Gold and Silver Nil Moderate Average Average Nil Average
RUBY SHARMARUBY SHARMA

18. Approaches to Investment Decision-Making
Fundamental approach: There is an intrinsic value of a security,
which depends upon underlying economic (fundamental) factors.
The intrinsic value can be established by a penetrating analysis of
the fundamental factors relating to the company, industry, and
economy.
Psychological approach: Stock prices are guided by emotion
rather than reason. Stock prices are believed to be influenced by
the psychological mood of investors.
RUBY SHARMARUBY SHARMA

19. Academic approach: Fairly sophisticated methods of
investigation are used by academic community to study various
aspects of capital market. Past price behaviour cannot be used to
predict future price behaviour. In the capital market, there is a
positive relationship between risk and return. More specifically,
the expected return from a security is linearly related to its
systematic risk.
RUBY SHARMARUBY SHARMA

20. Eclectic approach
The eclectic approach draws on all the three different approaches
discussed previously.
Operational implications of the eclectic approach Conduct
fundamental analysis to establish certain value “anchors” Do
technical analysis to assess the state of the market psychology.
Combine fundamental and technical analysis to determine which
securities are worth buying, worth holding, and worth disposing of
Respect market prices and do not show excessive zeal in “beating
the market”.
RUBY SHARMARUBY SHARMA

21. THANK YOU
Sources: material available on internet
RUBY SHARMA