introduction to investment - sapm
TRANSCRIPT
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SECURITY ANALYSIS & PORTFOLIO MANAGEMENT - INTRODUCTION
BY
VEDAPRADHA.R
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INTRODUCTION TO INVESTMENT
MANAGEMENT
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MEANING OF INVESTMENT
Investment is the application of present resources which have been saved or put aside from current consumption in the hope that some benefit will occur in the future.
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NEED FOR INVESTMENT
Increase in income level Increase in life expectancy Retirement benefits Minimise inflation pressure Tax benefits
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OBJECTIVES Maximise returns Minimise risk Hedge against inflation Regular income Avail tax benefits Safety for funds
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FACTORS INFLUENCING INVESTMENT DECISIONS
Return Risk Liquidity Tax shelter Marketability Convenience
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INVESTMENT PROCESS Determining investment objectives and policy Security analysis Construction of portfolio Portfolio revision/rebalancing Portfolio evaluation
Note: KYC from SEBI is mandatory
( registered office) for mutual funds & stock market entry – Individual investors only
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INVESTMENT ALTERNATIVES/AVENUES
• FINANCIAL ASSETS
• Non marketable financial securities
• Bonds
• Mutual funds
• Shares
• Money market instruments
• Life insurance policies
•REAL ASSETS•Precious stones•Real estate•Precious metals•Art objects
•FINANCIAL DERIVATIVES
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NON MARKETABLE SECURITIES Bank deposits Post office savings Monthly income scheme of post office Kisan Vikas Patra National savings certificate Company deposits Employee provident fund scheme (EPF) Public Provident fund deposits
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SHARES
Equity
Preference
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EQUITY SHARES CAPITALISATION Blue chip shares Growth shares Income shares Cyclical shares Defensive shares Speculative shares Tech shares
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BONDS OR DEBENTURES
Government Bonds – RBI, PSU
Corporate bonds Municipal bonds
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MONEY MARKET INSTRUMENTS
Treasury bills Certificate of deposits Commercial paper Repos
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MUTUAL FUNDS
Equity scheme Debt scheme Balanced scheme
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LIFE INSURANCE
Endowment assurance policy Money back policy Whole life policy Term assurance policy ULIP
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REAL ASSETS Real estate Precious stones Precious metals
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FINANCIAL DERIVATIVES
Options Futures Forwards Swaps Collaterals
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MATRIX APPROACH TOWARDS INVESTMENT
The below are the criteria for evaluation of investment alternatives or matrix approach towards investment decisions.
Rate of return Risk Marketability Tax shelter Convenience Liquidity
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MATRIX APPROACH
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RISK & UNCERTAINTYTypes of Risk
SYSTEMATIC•Market risk•Interest rate risk•Purchasing power risk
UNSYSTEMATIC
•Business risk•Financial risk•Credit risk
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RETURN
Realized return - The actual or income which has been earned
Expected return – It is the return which an investor expects or anticipates earning over some future period
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COMPONENTS OF RETURN Current gains Capital gains
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BENEFITS OF DIVERSIFICATION
Minimisation of risk Portfolio optimization Human bias Hedging Tax benefits Economic cycles
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INVESTMENT STRATEGIES Investment objective Fluctuations Indifferent Individual approach Diversification Speculation Vs Investor Liquidity Analysis Common sense approach Long term investor
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MEASURES OF RISK & RETURN
Range Standard Deviation & co-variance
Beta
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