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Introduction When a person has more money than he requires for

current consumption, he would be coined as apotential investor. The investor who is having extracash could invest it in securities or in any other assetslike gold or real estate or could simply deposit it in hisbank account. The companies that have extra incomemay like to invest their money in expansion of existingfirm or undertake new venture. All of these activitiesin broader sense means investment.

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Investment Investment is the employment of funds on assets with

the aim of earning income or capital appreciation.Investment has two attributes namely time and risk.Present consumption is sacrificed to get a return in thefuture. It is for the long term Or we can say if a personbuys a stock for dividend it may be called investment.

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Speculation Speculation means taking up the business risk in the

hope of getting short term profits. Speculationessentially involves buying and selling activities withthe expectation of getting profits from the pricefluctuation.

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Gambling If person buys stock for intra day profit we can say that

he is gambling. Gambling is for short period of timethat is few hours or few mins or few seconds. Persontries to take advantage of f luctuations which happendaily in split second of time.

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Investment objective The main objective are increasing rate of return and

reducing the risk. We can say that the objectives of investments are:

1. Return

2. Risk 

3. Liquidity 

4. Hedge against inflation5. safety 

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The investment process The investment process involves a series of activities

leading to the purchase of securities or otherinvestment alternatives. The investment process canbe divided into five stages

1. Framing of investment policy 

2. Investment analysis

3.  Valuation4. Portfolio construction

5. Portfolio evaluation

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Framing of investment policyInvestible

funds

Objectives

knowledge

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Security analysisMarketanalysis

Industry analysis

Company analysis

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 Valuation

Future value

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Construction of portfolio

•

Debt and equity diversification

• Industry diversification

•

Company diversification• selection

Diversification

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Evaluation

 Appraisal

Revision

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securities

• Equity shares

• Sweat equity shares

• Non-voting shares

•

Right shares• Bonus shares

 Various types of securities aretraded in the

market. Security provides a claim on

an asset and any future cash flows

the assets may generate. The

securities can befixed and variableincome securities.

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Preference stockCumulative preference shares

Non-cumulative preference shares

Convertible preference shares

Redeemable preference shares

Irredeemable preference shares

Cumulative convertible preference shares

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Debentures

• Form : in form of certificate

• Interest

•

Redemption• Indenture: trust deed

Characteristicsof debentures

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Types of debenturesSecured or unsecured

Fully convertible

Partly convertible debenture

Non-convertible debenture

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BondSecured and unsecured bonds

Perpetual bonds and redeemable bonds

Fixed interest rate bonds and floating interest rate bonds

Zero coupon bonds

Deep discount bonds

Capital indexed bonds

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Investment informationInternational affairs

National affairs

Industry information

Company information

Stock market information