PB601 Investment

managementINTRODUCTION TO INVESTMENT

Definition of investment Place a portion of money for the purpose of

gain profit from the return

Example 0f investmentLending business (borrow money to others)Purchase of insurance planPurchase of bondPurchase of common stock and preferred stock

Characteristic of investment

RiskReturnSafety

LiquidityTax shelter

Advantages of investment and disadvantages

advantages Disadvantages

Save money for future Not all investment guaranteed in profit return

The return can be used for re-invest or keep the profit

Lose money of your investment

Money grow at good compared to inflation rate Sometimes investment becomes like gambling

Differentiate between investment, speculation and

gamblinginvestment speculation gambling

Rational investment behavior based in knowledge of past stock

price

Based on hope Make A bet on an uncertain income

Based on analysis of stock Stock price volatility estimates of future

Greater risk and disproportionate to the expected of return

Requires research and research based on the fact

Price speculation on rumors No analysis before buying shares

Long-term investment are usually more than two years

Based on an event It it’s a game of chance