Investment – risk & return
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This document discusses risk and return in investments. It defines return as the profits earned from an investment through dividends and capital appreciation. It then discusses different ways to calculate returns for single and multi-period investments. It also distinguishes between ex-post returns that have already occurred and ex-ante expected returns. The document goes on to define risk as the deviation from expected returns and discusses how standard deviation and variance are commonly used to measure risk. It also covers the benefits of diversification and how portfolio risk can be reduced through diversifying investments.
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http://borsaistanbul.com/en/news/2013/09/26/borsa-istanbul-organizes-the-first-of-futures-and-options-market-seminar-series
7330 Lecture01 Intro and Review-F10.ppt
This document provides an overview of the topics and schedule for an Advanced Corporate Finance course. The instructor is Ronald Singer and the course will cover capital budgeting, capital structure, and payout policy. Key concepts include net present value calculations, the capital asset pricing model, efficient portfolios, and how risk and return are related. Cash flow is emphasized as central to valuing projects, bonds, stocks, and firms. Determinants of capital structure and factors in payout policy decisions will also be examined.
7330 Lecture01 Intro and Review-F10.ppt
This document provides an overview of the Advanced Corporate Finance course taught by Ronald Singer. It includes administrative details like contact information and textbook. The course will cover key areas of corporate finance like capital budgeting, capital structure, and payout policy. For capital budgeting, it will discuss net present value calculations, risk adjustment, and valuation. For investments, it will cover portfolio theory and models like the capital market line and capital asset pricing model. The document emphasizes that corporate finance analysis focuses on estimating and discounting future cash flows.
Risk Ratings - Low Volatility Presentation Mello 2018
This document discusses achieving higher returns from lower risk stocks. It summarizes research showing that low volatility stocks have historically outperformed high volatility stocks in terms of risk-adjusted returns. The document advocates using a risk rating system to classify stocks based on volatility into categories like conservative, balanced, adventurous, etc. It shows that more conservative stocks have had higher long-term returns and better performance during market downturns compared to more speculative stocks. The document suggests strategies for investors like focusing on "conservative super stocks" that have attributes like quality, value and momentum to potentially further improve risk-adjusted returns from low volatility stocks.
How to Build an Investment Portfolio
This document provides guidance on building an effective investment portfolio through diversification and managing risk. It recommends creating an asset allocation policy based on your risk tolerance that diversifies across asset classes like stocks and bonds. Specific funds should then be selected within each asset class and regularly monitored to ensure the portfolio still matches your goals and risk profile as markets change over time. The focus should be on long-term growth while minimizing downside risk through this diversified, balanced approach.
technical_analysis.ppt
This document provides an overview of technical analysis and compares it to fundamental analysis. It discusses how technical analysis studies investor sentiment and emotion through the price and volume movements of securities, while fundamental analysis studies company metrics and financials. The document outlines the basic tools of technical analysis like charts and indicators and how they can be used to identify trends, support/resistance levels, and changes in investor behavior that may provide trading opportunities.
Introduction to Investing
The document discusses long-term investing and focuses on analyzing historical returns and risks of different asset classes like stocks, bonds, and bills going back to 1926. It examines average annual returns, best and worst years, volatility, percentage of up years, and rolling returns over 5, 10, and 20 year periods to understand how different investments have performed over time looking backward. The goal is to learn from historical data to set reasonable expectations and make informed decisions about long-term investing on a risk-adjusted basis.
Role Of Immediate Annuities
The document discusses the role of immediate annuities in retirement planning. It notes that retirees are likely to live longer than expected and will need to rely more on personal savings. Immediate annuities can provide a fixed stream of payments to supplement other retirement income sources by insuring against outliving one's assets. While immediate annuities reduce uncertainty, their suitability depends on factors like age, health, wealth level, income needs, risk tolerance, and desire to leave an estate or inheritance.
417Chapter 02
1) The chapter discusses sources of investment returns including income returns from cash flows and returns from changes in the value of investments.
2) It describes how to measure returns such as dollar returns, holding period returns, and annualized returns which allow comparisons over different time periods.
3) Risk is defined as the uncertainty of investment returns and can be measured by the variability of returns using metrics like variance and standard deviation. The higher the risk, the higher the expected return required by investors.
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More from Rakesh K.G.
Prof simply simple futures.pptx
A futures contract allows a farmer and bread manufacturer to lock in the price of wheat for delivery in 3 months when their price expectations differ. The farmer expects prices to fall to Rs. 90 while the manufacturer expects a rise to Rs. 120. Their contract sets the price at Rs. 110. If prices instead rise to Rs. 120, the farmer loses Rs. 10 but the manufacturer gains Rs. 10. Both parties' business interests are protected from price fluctuations through this mutually beneficial futures agreement.
Time value of_money
- The document discusses the concept of time value of money, which is that a rupee today is worth more than a rupee in the future due to opportunities to invest and earn a return.
- Money provides opportunities now that may not exist in the future, and by investing money can grow over time through returns rather than sitting idle and losing value.
- The opportunity cost of choosing one investment over another is the return foregone from the alternative, so risk-adjusted returns should be compared to determine the best use of money now.
Prof. simply simple derivatives vs cash
Derivative trading involves betting on the future price movements of assets like stocks using only a small margin amount. For example, with a Rs. 100 stock, you only need Rs. 10 margin to bet on price movements of 10 shares worth Rs. 1000 in total. This means derivative trading offers high gains but also high losses. If the stock price rises 10% to Rs. 120, you gain 100% returns on your Rs. 10 investment. However, if it falls 10% to Rs. 90, you lose your entire Rs. 10 investment. In contrast, spot market trading involves investing the full asset price, so gains and losses are lower. Derivative trading allows betting on groups of assets rather than single stocks.
Mf quotient
The document provides an overview of mutual funds, including their history starting in Belgium in 1822 and popularization in the US in 1920 with great growth post-1980. It describes mutual funds as a pooling of money from like-minded individuals with a common investment goal, managed professionally to provide benefits like diversification, management, and opportunities. It outlines different types of mutual funds and discusses expenses, risks, the investment process, valuation techniques, and benefits of systematic investment plans for long-term growth.
Markets & structures
The document discusses different types of markets, including public and private markets, and historical and trade markets. It also discusses different styles of markets, including call markets where market makers provide quotes, and continuous markets which function like a business auction. The document provides examples of different businesses for sale, including their requirements, costs, and potential returns. It emphasizes choosing the right business to maximize profits within the given parameters.
Investment – know how
This document discusses the key differences between investment and speculation. It defines investment as sacrificing something now for prospective future gains, involving the dimensions of time, today's sacrifice, and expected returns. Speculation is described as involving gut feelings, greed, fear, a focus on profits rather than assets, and greater risk-taking. The document provides examples to illustrate how the intentions and time horizons behind different transactions can determine whether they are investments or speculations. It stresses the importance of financial goals aligning with life goals and considering constraints like liquidity, age, time horizon, and risk tolerance when making investment decisions.
Introduction
The document outlines the modules and objectives of an investment course. The course will cover topics such as the basics of financial markets, different investment avenues and their risks/returns, sources of financial information, derivatives, market regulations, and equity trading mechanisms. Students will learn concepts through case studies and assignments. Their performance will be evaluated through group presentations, tests throughout the course, and a final exam assessing their theoretical, practical and case study skills. The overall aim is to help students understand investments and develop into successful investors.
Global markets
The document discusses stock exchanges and their functions. It notes that stock exchanges are organized markets recognized by SEBI for transacting in financial instruments and other tangible assets. All recognized exchanges in India have been demutualized and now operate as public or private limited companies. The key functions of stock exchanges include providing liquidity, safety of funds, a supply of long-term funds, and capital flows. Recent developments in stock exchanges include the entry of foreign institutional investors, listing of foreign stocks, expansion of stock indexes, and requirements such as companies having 25% of issued capital held by the public.
Equity trading methods
The document discusses the stock market and how it functions. It explains that the stock market is simply an organized place for trading shares and debentures, similar to local markets. It then outlines the various participants in the stock market like brokers, members, and sub-brokers. It also discusses how to open a trading account and the various costs associated with trading like brokerage fees, taxes, and charges. The document concludes by providing some tips for investors like investing for the long term, doing research, and following the overall economy.
Equity concepts
The document discusses equity as a form of financing for businesses. It notes that equity shareholders are owners of the business who enjoy residual profits, have liability restricted to their share capital contribution, and provide permanent capital. Equity shareholders also have voting rights and can decide major changes to the business. The document also provides a breakdown of the estimated costs for a project totaling Rs. 4,079 lakhs, including costs for land development, buildings, plant and machinery, other fixed assets, working capital, and contingencies.
All about money
This document discusses the history of money, including the use of gold and silver coins by ancient kings. It then covers the Bretton Woods system and how the US dollar was backed by gold reserves. The document also examines gold as the oldest form of money and a precious metal with spiritual value. Additionally, it explores concepts related to interest rates like opportunity cost, inflation, and the time value of money in compounding simple interest calculations over time.
Security market indicators
The document discusses security market indices and their role as indicators and barometers of economic performance and behavior. It notes that ideal indices should represent changes in value of all listed stocks and typical price movements. Factors in determining indices include selecting representative share samples, determining each share's relative importance, and averaging into a single reliable measure. The document also prompts the reader to identify products that impact their daily lives and pinch their budgets the most due to price changes.
Primary market
This document discusses the differences between new issues and stock exchanges. It covers the functional difference in how they operate, the organizational differences in their structure, and the nature of their contribution to industrial finance. The overall purpose is to explain why new issues and stock exchanges are both needed elements in the financial system.
Ipo & stock market
The document discusses the allotment prices and listing day prices of four companies: Macrohard, Woodpecker, Rotten Apple, and Sukro. It then provides updates on their stock prices over four quarters which were influenced by various news events for each company, such as a virus affecting Macrohard's operating system and Woodpecker losing its international license. By the fourth quarter, Macrohard has become the new market leader in operating systems, while the other companies have also grown but to a lesser extent due to their responses to challenges discussed in prior quarters.
IIQ
Itcheeban's Investment Quotient is an investment advisory company established in 2009 by an engineer and CFA to help citizens participate in India's economic growth. The company provides tailor-made investment management and tax services with the goal of sustaining and growing long-term wealth for individuals and families. It aims to become an investment bank that serves every individual in the country and helps eradicate poverty.
More from Rakesh K.G. (15)
Investment – risk & return
- 1. Risk & return Darr ke aage Jeet Hai!!!
- 2. Return • Literal Meaning – “Give Back” • Financial Literacy – “Give Back with Profits”
- 3. Calculation • Single Period • Multi Period • Compounded Return
- 4. Ex – Post & Ex - Ante • Experienced Incomes – • Expected Incomes – Dividends Dividends • Capital Appreciation • Capital Appreciation Experienced – Stock Expected - Stocks
- 5. Portfolio Return • Weighted Average Return Stock Price as on Price as on Yearly Rate of Return 01-04-XX 31-03-X1 Dividend (%) X 20 30 2 ?? Y 30 40 3 ?? Z 50 60 5 ?? Portfolio of 100 130 10 ??? (X,Y & Z)
- 6. Analyze Stock 01 02 03 04 05 Sterlite 30% 28% 34% 32% 31% Bauxite 26% 13% 48% 11% 57% • Which one would you pick?
- 7. Risk • Deviation from that of the Expectation • Uncertainty - Variation in Returns • Standard Deviation & Variance is the common measure in Finance
- 8. Standard Deviation • What is this? • What are the uses? • By –Heart the formulae.
- 9. Co-Relation • Relationship – Of the Movement – Of the Style • What is the use – Learn the Pattern – Determine the Relationship factor
- 10. Portfolio Risk • Benefits of a Portfolio ? - Assignment • Portfolio Risk of Sterlite & Bauxite • 40% in Sterlite & 60% in Bauxite Expected Expected Std Dev of Std Dev of Coefficient Return on Return on Sterlite Bauxite Co-relation Sterlite Bauxite 20% 30% 10% 16% -1 , 0.5 , +1
- 11. Company Specific RISK Market Specific
- 12. Company Specific • Sector Specific – Regulation & Legislation – Cartels , Guilds • Company Specific – Management – Capital Structure – Performance
- 13. Market Specific • “Follow the Economy, For the Stocks do the same” – Warren Buffet • Every Stock would have a co-variance with the market, hence the existence of Market Risk. • This Risk cannot be avoided. They are like kink in the Thermometer
- 14. Standard Deviation of Portfolio Return % Non – Systematic Risk Systematic Risk Number of Securities
- 15. B eeeeeeee T aaaaaaaaaa • The Unsystematic risk can be diversified but the Systematic one? • We cannot avoid the Systematic Risk by diversification, rather Minimize them. • Thus we use Beta, Which is formed from the Equation • Y = a + bx + e
- 16. • Beta = Covariance ( Stock & Market ) Variance of The Market • Substitution of the Formulae’s can help you learn more of the Relationships • Egs, Lower the Co – Relation between Market & Stock, Lower will be Beta & Vice Versa.
- 17. Risk Measurement • Systematic Risk – BETA Square * Variance of the Market • Unsystematic Risk – Variance of the Stock - Systematic Risk