Investment Analysis and Portfolio Management

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EXECUTIVE SUMMARY
In an economy, people indulge in economic activity to support their consumption requirements. Savings arise from deferred consumption, to be invested, in anticipation of future returns. Investments could be made into financial assets, like stocks, bonds, and similar instruments or into real assets, like houses, land, or commodities. The aim of Portfolio Manager is to provide a brief overview of three aspects of investment: * The various options available to an investor in financial instruments. * The tools used in modern finance to optimally manage the financial portfolio. * Lastly the professional asset management industry as it exists today. Returns more often than not differ across their risk profiles, generally rising with the expected risk, i.e., higher the returns, higher the risk. The underlying objective of portfolio management is therefore to create a balance between the trade-off of returns and risk across multiple asset classes. Portfolio management is the art of managing the expected return requirement for the corresponding risk tolerance. Simply put, a good portfolio manager’s objective is to maximize the return subject to the risk-tolerance level or to achieve a pre-specified level of return with minimum risk.

1. Investment and Its objectives
Mini Content
2.1 Define Investment
2.2 Defining Investment Objectives
2.3 Goals and Needs
2.4 Types of investors
2.5 Investment Process
2.6 Investments available in India
Define Investment
Investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security for the principal amount, as well as security of return, within an expected period of time. 1. The action or process of investing money for profit or material result. 2. Two main classes of investment are

(i) Fixed income investment such as bonds, fixed deposits, preference shares, and (ii) Variable income investment such as business ownership (equities), or property ownership. In economics, investment means creation of capital or goods capable of producing other goods or services. Expenditure on education and health is recognized as an investment in human capital, and research and development in intellectual capital. Return on investment (ROI) is a key measure of an organization's performance. DEFINING YOUR INVESTMENT OBJECTIVES:

Investing wisely is a function of your specific needs and goals. Each investor has different objectives that need to be met depending on age, income, planned activities, and attitudes about risk. How can you work with your investment advisor to best determine which investments are right for you? Among the important factors to consider are personal status, plans, and constraints. Some of the issues that you and your advisor should consider in defining the objectives that are right for you are listed below. Goals and Needs:

You may have specific goals and requirements that you want your investment portfolio to fulfill. For example, you may be funding college for children, business expansion, travel plans, or retirement needs. You should identify these goals and needs clearly with your investment advisor so that his or her recommendations for your portfolio can assist you in meeting them. Age:

Your age is an important consideration when deciding how much risk to assume. Portfolio assets that are riskier and that will fluctuate more over time may be appropriate for younger investors but not for others. An individual who does not expect to liquidate the assets in his or her portfolio for a number of years has more time to recover from a market downturn, while an investor close to retirement may be more likely to prefer stable assets and capital preservation. Age also affects the choice between income-earning securities and those oriented toward capital gains. An investor who is employed and near peak earning power will probably want to minimize paying taxes,...
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