Investment

• Tradeoff


  Present consumption for a higher level of future consumption
• Saving


  The reason for the tradeoff of present consumption for a higher level of future consumption
• Investment


  What the investor does with the savings to make them increase over time
• Pure rate of interest


  The rate of exchange between future consumption and current consumption
• Investment


  The current commitment of money for a period of time in order to derive future payment
• Investors


  • Individual
  • Government
  • Pension fund
  • Corporation
• Individual investor


  An individual who purchases small amounts of securities for themselves, as opposed to an institutional investor
• Retail investor


  Also called a small investor
• Investment


  The employment of funds with the aim of getting return on it
• Investment


  The concept of deferred consumption, which involves purchasing an asset
• Two concepts of Investment

  • Economic Investment - additional to the capital stock of the society
  • Financial Investment - allocation of monetary resources to assets that are expected to yield some gain or return over a given period of time
• Investing is a widespread practice
• Financial Objectives


  • Safety
  • Profitability
  • Liquidity
• Personal Objectives


  • Family commitments
  • Status
  • Dependents
• Investment Objectives


  • Short term high priority
  • Long term high priority
  • Low priority
  • Money making
• Investor Wants


  • Lifestyle - assets can meet financial needs over lifetimes
  • Financial Securities - protect against financial risk
  • Return - balance of risk and return suitable to personal risk preferences
  • Value for money - minimize costs of managing assets and financial needs
  • Peace of mind - not worry about day to day market movements and financial security
• Genuine investment


  Carefully thought out decisions
• Speculative investment


  Not carefully thought out decisions, based on tips and rumors
• Speculation


  An activity in which a person assumes high risks without regard for safety, to achieve larger capital gains
• Speculator


  A person who speculates, who does not buy goods to own them, but to sell them later to profit from changes in market prices
• Elements of Investment


  • Return
  • Risk
  • Time
  • Liquidity
  • Tax Saving
• Investment Attributes


  • Safety & Security of the principal amount
  • Profitability (through interest, dividend and capital appreciation)
  • Liquidity (convertibility into cash when required)
• Period of Investment


  • Short Term (up to 1 year)
  • Medium Term (1 year to 3 years)
  • Long Term (3 years and above)
• Investment Avenues


  • Shares
  • Debentures and Bonds
  • Public Deposits
  • Bank Deposits
  • Post Office Savings
  • Cryptocurrencies
  • Money Market Instruments
  • Mutual Fund Schemes
  • Life Insurance Schemes
  • Real Estates
  • Gold-Silver
  • Derivative Instruments
  • Commodity Market (commodities)
• Top 10 Good Investment Opportunities in the Philippines

  • Stocks
  • Foreign Exchange (Forex)
  • CFDs Trading
  • Cryptocurrency
  • Oil
  • Gold
  • Silver
  • Indices
  • Mutual Funds
  • Bond
• Portfolio


  The combined holding of many kinds of financial securities
• Investment portfolio


  The various assets of an investor which are to be considered as a unit
• Portfolio management


  The selection of securities and constant shifting of the portfolio
• Portfolio management includes


  • Portfolio planning
  • Selection and construction
  • Review and evaluation of securities
• Timing is an important aspect of portfolio revision
• Ideally, investors should sell at market tops and buy at market bottoms
• Portfolio management is all about strengths, weaknesses, opportunities and threats
• Portfolio management is an art and science of making decisions about investment mix and policy
• The stock markets have become attractive investment options for the common man
• Objectives of Portfolio Management

  • Security/Safety of Principal
  • Stability of Income
  • Capital Growth
  • Marketability
  • Liquidity
  • Diversification
  • Favorable Tax status (Tax Incentives)
• Components of Portfolio Construction

  • Asset allocation
  • Security selection
  • Portfolio structure
• Diversification


  Investing in a number of different securities rather than concentrating in one or two securities
• Merchant bank


  A financial institution primarily engaged in offering financial services
• Merchant bank vs Investment bank

  Merchant bank invests its own capital in a client company, while an investment bank purely distributes (and trades) the securities of that company in its capital raising role
• Portfolio manager


  A person who makes investment decisions using money other people have placed under his or her control