Four Approaches to Information Technology Infrastructure Investment

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Presented by: Kemeasoudei Fanama (u0856287)


Information technology is defined as the study, design, development, implementation, support or management of computer- based information systems, particularly software applications and computer hardware. IT deals with the use of electronic computers and computer software to convert, store, transmit, process, protect and securely retrieve information.

APPROACHES TO INFORMATION TECHNOLOGY INFRASTRUCTURE INVESTMENT 1. Fundamental Approach: The basic tenets of the fundamental approach, which is perhaps most commonly advocated by investment professionals, are as follows: There is an intrinsic value of a security and this 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. At any given point of time, there are some securities for which the prevailing market price would differ from the intrinsic value. Sooner or later, of course, the market price would fall in line with the intrinsic value.

Superior returns can be earned by buying under-valued securities (securities whose intrinsic value exceeds the market price) and selling over-valued securities (securities whose intrinsic value is less than the market price).

APPROACHES TO INFORMATION TECHNOLOGY INFRASTRUCTURE INVESTMENT (continued) 2. Psychological Approach: The psychological approach is based on the premise that stock prices are guided by emotion, rather than reason. Stock prices are believed to be influenced by the psychological mood of the investors. When greed and euphoria sweep the market, prices rise to dizzy heights. On the other hand, when fear and despair envelop the market, prices fall to abysmally low levels. Since psychic values appear to be more important than intrinsic values, the...
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