The document discusses investment processes and types of investments. It describes investment as using capital to generate returns over time by taking some risk. The main reasons for investing include earning returns on idle resources, saving for specific goals, and protecting against inflation. It recommends investing early, regularly, and for the long-term. The types of investments mentioned include stocks, bonds, mutual funds, real estate, precious metals, money markets, and commodities. Key participants in the investment process are governments, businesses, and individuals.
2. What is Investment
• An instrument that promises some certain or
uncertain return in the future.
• Process of using money (called capital) to buy an
asset that will generate a safe and acceptable return
over time.
• Investment means willing to take some risk and
putting your money in instruments with potential of
higher returns.
3. ONE NEEDS TO INVEST TO.
EARN RETURN ON YOUR IDLE RESOURCES
GENERATE A SPECIFIED SUM OF MONEY FOR A
SPECIFIC GOAL IN LIFE
MAKE A PROVISION FOR AN UNCERTAIN FUTURE
ONE OF THE IMPORTANT REASONS WHY ONE NEEDS TO INVEST
WISELY IS TO MEET THE COST OF INFLATION. INFLATION IS THE
RATE AT WHICH THE COST OF LIVING INCREASES.
Why should one invest?
4. When to start Investing?
The sooner one starts investing the better. By investing early you allow
your investments more time to grow, whereby the concept of
compounding increases your income, by accumulating the principal
and the interest or dividend earned on it, year after year.
The three golden rules for all investors are:
Invest early
Invest regularly
Invest for long term and not short term
5. Before making any investment, one must ensure to:
1. Obtain written documents explaining the investment
2. Read and understand such documents
3. Verify the legitimacy of the investment
4.Find out the costs and benefits associated with the
investment
5. Assess the risk-return profile of the investment
6.Know the liquidity and safety aspects of the
investment
What care should one take while
investing?
6. 7. Ascertain if it is appropriate for your specific goals
8.Compare these details with other investment
opportunities
available
9.Examine if it fits in with other investments you are
considering or
you have already made
10. Deal only through an authorized intermediary
11.Seek all clarifications about the intermediary and the
investment
12.Explore the options available to you if something
were to go
wrong, and then, if satisfied, make the investment.
These are called the twelve important steps to investing.
CONT..
7. Non- marketable.
bond or fixed income .
mutual funds.
real estate.
Equity.
gold/silver/precious metals/stones.
money market.
commodity market.
Various Types of Investments
9. A person, company, etc., That seeks the advice of a
professional man or woman a person depending on
another's patronage
how to know the investor?
Gain the personnel information of client.
Find the need of the investor.
Financial status of investor.
Time period investor is having to achieve that goal.
Understand the risk appetite of the investor.
Client Profile
10. Objective should vary from person to person.
Like
daughter marriage.
Building dream home.
Children education.
Objective of investment should be ethical.
Both for long term and short term.
AS WE KNOW THERE ARE THREE TYPES OF
INVESTOR
conservative, moderate, aggressive
Objective and Risk analysis.
11. Analysis of market and economic condition is very
important .
various economic and market factor
inflation .
different rates.
Historical market trend.
Performance of particular scheme where you are
going to invest.
Etc……….
Economic and Market analysis
12. A systematic approach to investing among different
categories of investments. It determine the best way
to divide investable assets into the various types of
asset classes:
diversification :
investing in a number of different investments, to
reduce the overall risk of investments.
Asset Allocation
13. After doing all now select the investment which fulfill
your objective , goals, need, time and risk and than
implement it.
Investment selection and
Implementation
14. Who are the Participants in
the investment process?
Government
Both local and national government need large amounts of money.
Funds are needed to finance capital expenditures like long-term
infrastructure projects – road building, schools and hospitals through the
issuance of different types of long-term debt securities. Also,
government needs to fund operating costs that keep it running.
Normally these funds are sourced from taxes and fees collections. In
cases where the operating expenditures exceed government revenues or
if government receipts are not yet available to meet government
payments, government resorts to borrowing funds by issuing short-term
debt securities. If government has temporary idle cash, it sometimes
makes short-term investments to earn positive returns. As such,
government becomes suppliers of funds.
15. 1. Government
Both local and national government need large amounts of money.
Funds are needed to finance capital expenditures like long-term
infrastructure projects – road building, schools and hospitals
through the issuance of different types of long-term debt securities.
Also, government needs to fund operating costs that keep it
running. Normally these funds are sourced from taxes and fees
collections. In cases where the operating expenditures exceed
government revenues or if government receipts are not yet
available to meet government payments, government resorts to
borrowing funds by issuing short-term debt securities. If
government has temporary idle cash, it sometimes makes short-
term investments to earn positive returns. As such, government
becomes suppliers of funds.
16. 2. Business
Most businesses require big sums of money to support operations in
both the long term and short-term. On the short-term, funds are used to
meet operating cost like financing inventory and accounts receivables.
Long-term needs of businesses are concentrated on seeking funds to
develop products, build plants and buy equipment. Financing these
needs require businesses to issue a variety of debt and equity securities.
Like government, business firms also supply funds if they have excess
cash. At the same time, they are both net demanders of fund since they
demand more funds than they supply.
17. Individuals
We are more familiar of the fact that people need money, in the form of
loans, to buy property like cars and houses. Yet individuals supply
funds to help meet the needs of both government and businesses
through deposits in savings accounts, purchases of debt or equity
securities, buy insurance or various types of property. As a group,
individuals are net suppliers of funds; they put money into the financial
system than they take out.
19. Individual
Individual investors personally handle their
funds to meet their financial goals. Earning
interest from idle funds, ensuring the family’s
security and building a retirement fund are
some reasons why the individual investor
invests.
20. Institutional
People with large sums of money for investment or who are too busy or
lack expertise for investment decisions often hire an institutional
investor. Institutional investors commonly know as fund managers, are
investment professionals paid to manage the funds of others using their
expertise and sophistication in both investment knowledge and method.
Aside from rich individuals and professional investors include financial
institutions and large non-financial corporations. Individual investors
trade in large amounts of securities to earn high returns that can be used
as additional sources of interest payments (for banks) and benefits to
policyholders or beneficiaries (for insurance companies).
