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This document provides an overview of investment alternatives and decision making. It discusses the differences between investors and speculators, outlines various investment avenues including equity shares, bonds, mutual funds, real estate, and financial derivatives. It also describes the classification of financial markets and money market instruments. Various investment attributes such as return, risk, liquidity, and tax shelter are evaluated for different investment options. The portfolio management process and approaches to investment decision making such as fundamental analysis and technical analysis are also summarized.
This document provides an overview of investment alternatives and decision making. It discusses the differences between investors and speculators, outlines various investment avenues including equity shares, bonds, mutual funds, real estate, and financial derivatives. It also describes the classification of financial markets and money market instruments. Various investment attributes such as return, risk, liquidity, and tax shelter are evaluated for different investment options. The portfolio management process and approaches to investment decision making such as fundamental analysis and technical analysis are also summarized.
This document provides an overview of investment alternatives and decision making. It discusses the differences between investors and speculators, outlines various investment avenues including equity shares, bonds, mutual funds, real estate, and financial derivatives. It also describes the classification of financial markets and money market instruments. Various investment attributes such as return, risk, liquidity, and tax shelter are evaluated for different investment options. The portfolio management process and approaches to investment decision making such as fundamental analysis and technical analysis are also summarized.
DECISION MAKING OUTLINE Investment Alternatives Investment Attributes Investment versus Speculation Financial Markets Portfolio Management Process Approaches to Investment Decision Making INVESTMENT VS. SPECULATION
INVESTOR SPECULATOR
PLANNING LONG SHORT HORIZON RISK MODERATE HIGH DISPOSITION RETURN MODEST HIGH EXPECTATION BASIS FOR FUNDAMENTAL TECHNICAL DECISIONS
LEVERAGE NO HIGH
INVESTMENT ALTERNATIVES
Investment Avenues Equity Shares Money Market Instruments Life Insurance Policies Precious Objects Non- marketable Financial Assets Bonds Mutual Fund Schemes Real Estate Financial Derivatives
NON - MARKETABLE FINANCIAL ASSETS BANK DEPOSITS POST OFFICE TIME DEPOSITS (POTDs) MONTHLY INCOME SCHEME OF THE POST OFFICE (MISPO) KISAN VIKAS PATRA (KVP) NATIONAL SAVINGS CERTIFICATE COMPANY DEPOSITS EMPLOYEES PROVIDENT FUND SCHEME PUBLIC PROVIDENT FUND SCHEME Financial market is a market for the creation and exchange of financial assets. This market facilitates price discovery and liquidity to the financial instruments. CLASSIFICATI ON OF FINANCIAL MARKETS
DEBT MARKET NATURE OF CLAIM EQUITY MARKET
MONEY MARKET MATURITY OF CLAIM CAPITAL MARKET
PRIMARY MARKET SEASONING OF CLAIM SECONDARY MARKET
CASH OR SPOT MARKET TIMING OF DELIVERY FORWARD OR FUTURES MARKET
Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof. Bond markets, which provide financing through the issuance of bonds, and enable the subsequent trading thereof. Commodity markets, which facilitate the trading of commodities.
Money markets, which provide short term debt financing and investment Treasury Bills,Federal Funds,Repurchase Agreements,Negotiable Certificates of Deposit Derivatives markets, which provide instruments for the management of financial risk. Foreign exchange markets, which facilitate the trading of foreign exchange. MONEY MARKET INSTRUMENTS
TREASURY BILLS CERTIFICATES OF DEPOSITS COMMERCIAL PAPER REPOS BONDS OR FIXED INCOME SECURITIES Government Securities Private Sector Debentures Saving bonds PSU Bonds Preference Shares (Hybrid securities) EQUITY SHARES Equity shares represent the ownership capital. It also means sharing the risk and return of a particular company. CLASSIFICATION OF EQUITY SHARES BLUE-CHIP SHARES GROWTH SHARES INCOME SHARES CYCLICAL SHARES DEFENSIVE SHARES SPECULATIVE SHARES
MUTUAL FUND SCHEMES Equity Schemes Balanced Schemes Debt Schemes INSURANCE POLICIES These are also non marketable securities. Various types of insurance policies are: Endowment Assurance Money Back Plan Whole Life Assurance Unit Linked Plan Term Assurance Immediate Annuity Deferred Annuity REAL ESTATE Residential House Commercial Property Agricultural Land Urban and Suburban Land Time Share in a Holiday Resort PRECIOUS OBJECTS Gold and Silver Precious Stones Art Objects FINANCIAL DERIVATIVES
A derivative is an instruments whose value depends on the value of some underlying asset. The various types of derivatives are Forwards Futures Options swaps
Capital appreciation Risk Marketability/ Liquidity Tax Shelter Convenience Equity Shares Low High High Fairly high High High Non- convertible Debentures High Negligible Low Average Nil High Equity Schemes Low High High High High Very high Debt Schemes Moderate Low Low High No tax on dividends Very high Bank Deposits Moderate Nil Negligible High Nil Very high Public Provident Fund Nil Moderate Nil Average Section 80 C benefit Very high Life Insurance Policies Nil Moderate Nil Average Section 80 C benefit Very High Residential House Moderate Moderate Negligible Low High Fair Gold and Silver Nil Moderate Average Average Nil Average
Return EVALUATION OF VARIOUS INVESTMENT AVENUES PORTFOLIO MANAGEMENT PROCCESS
SPECIFICATION OF INVESTMENT OBJECTIVES AND CONSTRAINTS CHOICE OF ASSET MIX FORMULATION OF PORTFOLIO STRATEGY SELECTION OF SECURITIES PORTFOLIO EXECUTION PORTFOLIO EVALUATION
PORTFOLIO REVISION APPROACHES TO INVESTMENT DECISION MAKING
FUNDAMENTAL APPROACH TECHNICAL ANALYSIS ACADEMIC APPROACH MP IV RANDOM WALK POSITIVE LINK..RISK & RETURN