investment - Investment Investment involves employment of...

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Unformatted text preview: Investment Investment involves employment of funds with the aim of achieving additional income or growth in value of an asset. Investment may be defined as “a commitment of funds made in the expectation of some positive rate of return”. Characterstics of Investment 1. 2. 3. 4. 5. Return Risk Safety Liquidity Tax purpose Objectives of an investor can be stated as follows: Maximization of return. Minimization of risk. Hedge against inflation. 1. 2. 3. Investment Commits funds to low risk Investment Purchase of securities is done with proper investigation and analysis to receive stable returns and capital appreciation over a period of time. Investment is long term in nature 1. 2. 3. Speculation Commits funds to higher risk Investment It is related with buying low and selling high with the hope of making high capital gains. speculation is only short-term. Types of Investors Individuals : large in number – Investable resources are lower Institutions : Mutual Funds, Investment Companies, Banking &NBFC’s and Insurance companies.- Less in number – Investable resources are higher Engage professional fund manager to carry out extensive analysis Investment Avenues Non Marketable Financial Assets Equity Shares Bonds Money Market Instruments Mutual Fund Schemes Life Insurance Policies Real Estate Precious Objects Financial Derivatives Investment Avenues Non Marketable Financial Assets: A good portion of financial assets is represented by non- marketable financial assets. These can be classified into the following broad categories: Bank Deposits (current,savings,fixed,Recurring) Post office Deposits (Recurring ,Senior citizen scheme,Kisan Vikas patra,Time deposit account,Monthly income scheme,National savings) Company Deposits Provident Fund Deposits Bonds: Savings Bonds PSU Bonds Debentures of Private Sector Companies Preference Shares Money market Instruments: Debt instruments which have a maturity of less than one year at the time of issue are called money market instruments. The important money market instruments are: Treasury Bills Commercial Paper Certificate of Deposit Call money Inter corporate loan Market Mutual Funds: Instead of directly buying equity shares and/or fixed income instruments, you can participate in various schemes floated by mutual funds which, in turn, invest in equity shares and fixed income securities. There are three broad types of mutual fund schemes: Equity Schemes Debt Schemes Balanced Schemes MMMF schemes Life Insurance: In a broad sense, life insurance may be viewed as an investment. Insurance premiums represent the sacrifice, and the assured sum, the benefit. The important types of insurance policies in India are: Endowment Assurance Policy Money Back Policy Whole Life Policy Term Assurance Policy Real Estate: For the bulk of the investors the most important asset in their portfolio is a residential house. In addition to a residential house, the more affluent investors are likely to be interested in the following types of real estates: Agriculture Land Semi-Urban Land Commercial Property Precious Objects: Precious objects are items that are generally small in size but highly valuable in monetary terms. Some important precious objects are: Gold and Silver Precious Stones Art Objects Financial Derivatives: A financial derivative is an instrument whose value is derived from the value of an underlying asset. The most important financial derivatives from the point of view of investors are: Forwards Futures Options swaps ...
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  • Spring '17
  • precious objects, non marketable

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