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Learning Objectives

What is investment, speculation and gambling. Explain the different modes of investment for investor. Discuss the financial investments, physical investments, maketable investments and non marketable investments. What are the factors influencing the investment? Who is investor? What are the qualities of investor? Discuss the different types of investor.

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” - By Graham and Qadd’s Security Analysis “Investment Management is the process of managing money, including investments, budgeting, banking and taxes, also called as money management.”

We shall discuss about the following factors: • Firstly: Meaning, concept, characteristics, need and importance, avenues, classification and modes of investment. • Secondly: Influencing factors, process, feature, source of risk, recent trends and problems of investment. • Thirdly: Meaning, characteristics, difference in speculation, investment and gambling.


Investment Management

Investment is a term for several closely related meanings in finance and economics. Investment according to Theoretical Economics Investment means the production of capital goods - goods which are not consumed but instead used in future production.

Examples include • Building • A rail road • A Factory clearing land • Putting oneself through college Investment according to Finance Term Investment means buying of Assets. For Examples • Buying stocks and bonds • Investing in real estate • Mortgages These investments may then provide a future income and increase in value (i.e., investing in real estate). Investment according to Oxford Dictionary Investment means the investing of money. Investment from an Individual Point of View Investment refers to a money commitment of some sort. For example l. A commitment of money to buy a new car is certainly an “investment”.

Investment refers to invest money in Financial physical assets and Marketable assets. Major investments features such as risk, return, safety, liquidity, marketability concealability, capital growth, purchasing power, stability and the benefits.

Tax Benifits Stability of Income Return Marketability Liquidity Safety Concealability



Capital Growth Risk Purchasing Power Stability

Fig. 1.1 Characteristics of Investment

Figure 1.1 indicates that an important characteristics of investments is outlined as: • Risk • Return • Safety • Liquidity • Marketability • Concealability • Capital growth • Purchasing power stability • Stability of income • Tax benefits. Risk Risk refers to the loss of principal amount of an investment. It is one of the major characteristics of an investment. The risk depends on the following factors: • The investment maturity period is longer, in this case, investor will take larger risk. • Government or Semi Government bodies are issuing securities which have less risk. • In the case of the debt instrument or fixed deposit, the risk of above investment is less due to their secured and fixed interest payable on them. For instance Debentures. • In the case of ownership instrument like equity or preference shares, the risk is more due to their unsecured nature and variability of their return and ownership character. • The risk of degree of variability of returns is more in the case of ownership capital compare to debt capital. • The tax provisions would influence the return of risk.


Investment Management

Return Return refers to expected rate of return from an investment • Return is an important characteristics of investment. Return is the major factor which influences the pattern of investment that is made by the investor. Investor always prefers to high rate...
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