Investment Assignment

Investment assignment
Romika Dhingra
B.com 3 rd year
Question 1:- What do you meant by Investment Decision Process? How is it going to help the investor in
making sound investment decision?
Answer 1:- The Investment Decision relates to the decision made by the investors or the top level
management with respect to the amount of funds to be deployed in the investment opportunities .
The word ‘Investment’ implies different meanings to different people.
To a Layman: - It may mean purchase of shares, bonds or other financial instruments
To an Economist: - It implies purchase of Fixed productive assets (Capital assets) such as plant and
Machinery.
To a Businessman: - It refers to purchase of fixed assets such as Land, Building, Plant, Machinery etc.
An investment process is a set of guidelines that govern the behavior of investors in a way which allows
them to remain faithful to the tenets of the investment process, that is the key principles which they
hope to facilitate outperformance.
To help an investor take a sound financial decision, the following stages are undertaken to help the
investor take the decision that is best possible for him
A. Identifying the client and his investment objective
It is the work of the investor to identify what for what reason is he willing to invest. investment
objectives are related to what the client wants to achieve with the portfolio of investments. Objectives
define the purpose of setting the portfolio. He needs to decide if it is for risk and return, tax benefit,
hedge funding, safety of capital or regular income.
B. Building up an inventory of securities
C. Security analysis
D. Constructing a portfolio, its analysis and selection
An investment portfolio is a collection of assets and securities and can include investments like stocks,
bonds, mutual funds and exchange-traded funds. Choosing the right strategy for portfolio creation is
very important as it forms the basis of selecting the assets that will be added in the portfolio
management process. The strategy that conforms to the investment policies and investment objectives
should be selected.
E. Portfolio revision
The art of changing the mix of securities in a portfolio is called as portfolio revision.
The process of addition of more assets in an existing portfolio or changing the ratio of funds invested is
called as portfolio revision.
The sale and purchase of assets in an existing portfolio over a certain period of time to maximize returns
and minimize risk is called as Portfolio revision.
F. Performance evalution
This step helps the investor to see whether his investment has yielded the results he was seeking and
find any deviations(if any).It also helps thr investor to take better and more informed decisions the next
time
Good investment decisions help the investor as it helps the investor to take sound decions that would
help them gget more return and less risk and also safeguards the wealth.
Question 2:- What is Financial Investment? How is it different from real investment?
Answer 2:- Financial investment refers to putting aside a fixed amount of money and expecting some
kind of gain out of it within a stipulated time frame. Financial investment simply means transfer of
rights from one party on another. While one party has made investment, the other has made
disinvestment. it does not add to the stock of real capital of an economy. The purchase of stocks and
shares, debentures government bonds and equities is a financial investment. It is referred to as financial
investment because it does not involve anything more than a mere transfer of the titles of ownership
from one individual tot eh other and the stock of economy’s real capital is left unchanged.
Types of Financial Investment
An individual can invest in any of the following:
 Mutual Funds
 Fixed Deposits
 Bonds
 Stock
 Equities
 Real Estate (Residential/Commercial Property)
 Gold /Silver
 Precious stones
Financial investment differs from real investment because;

• Financial assets are divisible, whereas most physical assets are not. An asset is divisible if investor can
trade a small portion of it. In case of financial assets it means, that investor, for example, can buy or sell
a small section of the whole company as an investment object by buying or selling some commonstocks.
• Financial assets have more liquidity compared to real assets. Marketability (or liquidity) is the
feasibility of converting of the asset into cash quickly and without significantly affecting its price. Most of
financial assets are easy to buy or to sell in the financial markets.
• The planned holding period of financial assets can be much shorter than the holding period of most
physical assets. Holding period is the time between signing a purchasing order for asset and selling the
asset. Investors acquiring physical asset usually plan to hold it for a long period, financial assets can be
held, even for some months or even a year. Holding period for investing in financial assets vary very
widely and depends on the investor’s goals and investment strategy.

Investment Assignment

Uploaded by

Copyright:

Available Formats

Investment Assignment

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Investment Assignment

Uploaded by

Copyright:

Available Formats

Investment assignment

The word ‘Investment’ implies different meanings to different people.

To a Layman: - It may mean purchase of shares, bonds or other financial instruments

A. Identifying the client and his investment objective

B. Building up an inventory of securities

D. Constructing a portfolio, its analysis and selection

Types of Financial Investment

An individual can invest in any of the following:

Financial investment differs from real investment because;

You might also like