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    II. Investment Environment

    Uploaded by

    Ray Mund
    An investment is an asset that is expected to generate income or appreciate in value. A collection of different investments is called a portfolio. Investments can provide returns in the form of income, like interest or dividends, or capital appreciation through increased value. Some key types of investments include securities, real property, direct or indirect holdings, debt, equity, or derivative assets that vary in risk level and time horizon. A portfolio allows investors to diversify across different asset classes and manage risk.

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    II. Investment Environment

    Uploaded by

    Ray Mund
    88 views45 pages
    An investment is an asset that is expected to generate income or appreciate in value. A collection of different investments is called a portfolio. Investments can provide returns in the form of income, like interest or dividends, or capital appreciation through increased value. Some key types of investments include securities, real property, direct or indirect holdings, debt, equity, or derivative assets that vary in risk level and time horizon. A portfolio allows investors to diversify across different asset classes and manage risk.

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    An investment is an asset that is expected to generate income or appreciate in value. A collection of different investments is called a portfolio. Investments can provide returns in the form of income, like interest or dividends, or capital appreciation through increased value. Some key types of investments include securities, real property, direct or indirect holdings, debt, equity, or derivative assets that vary in risk level and time horizon. A portfolio allows investors to diversify across different asset classes and manage risk.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    88 views45 pages

    II. Investment Environment

    Uploaded by

    Ray Mund
    An investment is an asset that is expected to generate income or appreciate in value. A collection of different investments is called a portfolio. Investments can provide returns in the form of income, like interest or dividends, or capital appreciation through increased value. Some key types of investments include securities, real property, direct or indirect holdings, debt, equity, or derivative assets that vary in risk level and time horizon. A portfolio allows investors to diversify across different asset classes and manage risk.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 45

    An investment is simply any

    asset into which funds can be


    placed with the expectation
    that it will generate positive
    income /increase its value, and
    a collection of different
    investments is called a
    portfolio.
    Investment
    The rewards, or returns, come in two basic
    forms: income and increased value.
    CAPITAL GAIN/
    DIVIDENDS CAPITAL APPRECIATION

    • Money invested in a savings account provides


    income in the form of periodic interest payments.
    Is cash placed in a simple (no-interest)
    checking account an investment?
    No, because it fails both
    tests of the definition: It
    does not provide added
    income and its value does
    not increase.
    In fact, over time inflation
    erodes the purchasing power
    of money left in a non-
    interest-bearing checking
    account.
    TS
    EN
    TM
    ES
    INV
    O F
    ES
    P
    TY
    SECURITIES OR PROPERTY
    •Securities are investments issued by firms,
    governments, or other organizations that represent a
    financial claim on the resources of the issuer.

    •Property is consists of investments in real property


    or tangible personal property.
    DIRECT OR INDIRECT
    •A direct investment is one in which
    an investor directly acquires a claim
    on a security or property.

    •An indirect investment is an


    investment in a collection of securities
    or properties managed by a
    professional investor.
    DEBT, EQUITY, OR DERIVATIVE SECURITIES
    •Debt is simply a loan that obligates the borrower to
    make periodic interest payments and to repay the full
    amount of the loan by some future date.

    •Equity represents ongoing ownership in a business or


    property. An equity investment may be held as a security
    or by title to a specific property.

    •Derivative securities derive their value from an


    underlying security or asset.
    LOW OR HIGH-RISK INVESTMENTS
    Investments also differ on the basis
    of risk. Risk reflects the uncertainty
    surrounding the return that a
    particular investment will generate.
    To oversimplify things slightly, the
    more uncertain the return associated
    with an investment, the greater is its
    risk.
    SHORT OR LONG-TERM INVESTMENTS

    •Short-term investments typically mature


    within one year.

    •Long-term investments are those with


    longer maturities or, like common stock,
    with no maturity at all.
    DOMESTIC OR FOREIGN
    Investors routinely also look for foreign
    investments (both direct and indirect) that
    might offer more attractive returns than purely
    domestic investments. Even when the returns
    offered by foreign investments are not higher
    than those found in domestic securities,
    investors may still choose to make foreign
    investments because they help them build
    more diversified portfolios, which in turn
    helps limit exposure to risk.
    S S
    CE
    RO
    T P
    EN
    TM
    ES
    INV
    SUPPLIERS AND DEMANDERS OF FUNDS
    INVESTMENT PROCESS
    LES
    HIC
    V E
    NT
    M E
    ST
    V E
    IN
    SHORT-TERM INVESTMENTS
    Short-term investments
    Savings instruments with lives of 1
    year or less. Used to warehouse idle
    funds and to provide liquidity.

    Example:
    Deposit accounts, Treasury bills (T-
    bills), Certificates of deposit (CDs),
    Commercial paper, Money market
    mutual funds
    COMMON STOCKS

    Equity investments that


    represent ownership in a
    corporation.
    FIXED-INCOME SECURITIES
    Investments that make fixed cash payments at regular intervals.
    Example: Bonds, Convertible securities, Preferred stock

    • Bonds - Bonds are long-term debt instruments (in other words, an IOU, or promise to pay) issued
    by corporations and governments.
    • Convertible securities - A convertible security is a special type of fixed-income investment. It has a
    feature permitting the investor to convert it into a specified number of shares of common stock.
    Convertibles provide the fixed-income benefit of a bond (interest) while offering the price-
    appreciation (capital gain) potential of common stock.
    • Preferred stock - Like common stock, preferred stock represents an ownership interest in a
    corporation and has no maturity date. Unlike common stock, preferred stock has a fixed dividend
    rate. Firms are generally required to pay dividends on preferred shares before they are allowed to
    pay dividends on their common shares.
    HIGHLY SAFE AND
    MUTUAL FUNDS
    LIQUID TRANSPARENT

    IDEAL FOR PEOPLE WHO:


    STRESS-FREE
    INVESTING have no time to trade
    BEAT
    INFLATION have limited amount of money
    PROFESSIONALLY
    MANAGED AFFORDABLE
    are not an expert

    Companies that pool money from


    HIGH
    RETURN
    many investors and invest funds
    DIVERSIFICATION in a diversified portfolio of
    securities.
    CONVENIENT
    NON-
    TAXABLE
    EXCHANGE-TRADED FUNDs
    Investment funds, typically index funds, that are exchange listed and,
    therefore, exchange traded.

    Example:

    Stock index funds, Bond index funds

    • FIRST METRO PHILIPPINE EQUITY EXCHANGE TRADED FUND


    INCORPORATED – is known to be the first exchange traded fund in
    the Philippines
    HEDGE FUNDS

    Alternative investments, usually in pools of


    underlying securities, available only to
    sophisticated investors, such as institutions
    and individuals with significant assets.

    Example:
    • Long and short equities, Funds of funds
    DERIVATIVES

    Securities that are neither debt nor equity


    but are structured to exhibit the
    characteristics of the underlying assets
    from which they derive their value.
    They are the most risky financial assets
    because they are designed to magnify price
    changes of underlying assets.
    Example:
    • Options
    • Futures
    • Forwards
    • Swaps
    OTHER POPULAR INVESTMENTS
    Various other investments that are widely used by
    investors.

    Example:
    • Tax-advantaged investments
    • Real estate
    • Tangibles
    IN G
    ST
    IN VE
    IN
    PS
    E
    ST
    1
    Meeting Investment Prerequisites
    2
    Establishing Investment Goals
    3
    Adopting an Investment Plan
    4
    Evaluating Investment Vehicles
    5
    2. Considering
    Selecting Suitableyour taxes
    Investments
    6
    Constructing a Diversified Portfolio
    7
    Managing the Portfolio
    M E
    CO
    IN
    O F
    ES
    Y P
    T
    3 TYPES OF INCOME
    ACTIVE INCOME PASSIVE INCOME PORTFOLIO INCOME
    Income earned on the job as Income derived from real estate,
    limited partnerships, and other forms Earnings generated from
    well as other forms on various types of
    noninvestment income of tax-advantaged investments.
    investments.
    Salary/Bonus – Employee
    YOU WORK HARD MONEY
    Rentals Income WORK HARD
    – Apartment, FOR YOU
    Investment Income –
    FOR MONEY
    Professional Fee – Lawyer, CPA, Condominium Stocks, Mutual Funds,
    Doctor Derivatives & Long-term
    Income from your ❶ Income
    Royalty Incomekeeps coming
    – Franchise, even if you’re
    Healthcare
    direct– labor.
    Commission Agent, Broker Patent,not working.
    Literary Works,
    Composition Interest Income –
    Contract/Allotment
    ❷ You stop working,
    – Bonds, Treasury
    ❷ You stop working, your income Bills
    continues.
    OFW/Seafarer
    your income stops.
    Pension – Retiree
    L E
    YC
    E C
    L I F
    HE
    R T
    VE
    G O
    TI N
    ES
    IN V
    INVESTING OVER LIFE CYCLE

    1. Growth-oriented Youth (Age: 20-45)


    2. Middle-age Consolidation (Age: 46-60)
    3. Income-oriented Retirement Years (Age: 61-older)
    INVESTOR LIFE CYCLE
    • CAPITAL GAINS THAN • CAPITAL GAINS • CAPITAL PRESERVATION &
    CURRENT INCOME • HIGH-QUALITY STOCKS, CURRENT INCOME
    • GROWTH-ORIENTED & HIGH-GRADE BONDS, • HIGH-YIELDING BONDS,
    SPECULATIVE VEHICLES PREFERRED STOCKS & CD’s, ETC.
    • HIGH-RISK COMMON MUTUAL FUND • LOW-RISK INCOME STOCKS
    STOCKS • LOW-RISK GROWTH & & MUTUAL FUNDS
    • SAVINGS, EMERGENCY INCOME STOCKS • ESTATE PLANNING,PENSION
    FUND, DEBT, PROPERTY, • INVESTING, INSURANCE, FUND, HEALTHCARE
    CAR, EDUCATION CHILDREN’S EDUCATION,
    TRAVEL

    GROWTH
    GROWTH CONSOLIDATION
    CONSOLIDATION RETIREMENT
    20-45
    20-45 46-60
    46-60 61 and
    61 older
    & Older
    CE
    AN
    F IN
    I N
    S
    E ER
    AR
    C
    COMMERCIAL BANKS
    Ø Mortgage lending
    Ø Corporate lending
    Ø Asset management
    Ø Leasing
    Ø Consumer credit
    Ø International finance

    Banker/Teller, Financial Analyst,


    Credit Analyst, Customer Service Officer, Loan Officer,
    Business Development Officer, Treasury Manager,
    Bank Manager
    CORPORATE FINANCE
    Manage cash, short-term
    investments and long-term
    financing, evaluate investments,
    interface with investors and the
    financial community.

    Chief Finance Officer (CFO). The CFO’s primary


    responsibilities are to manage the firm’s capital
    resources and capital investments.
    Finance Manager, Financial Analyst, Internal Auditor,
    Accounting Staff, Treasury Analyst, Bookkeeper
    FINANCIAL PLANNER
    Personal financial planner, you
    provide financial advice relating
    to education, retirement,
    investment, insurance, tax, and
    estate planning.

    Financial Planner/Consultant.
    Consulted by business owners for advice on issues
    such as cash flow management, investment planning,
    risk management and insurance planning, tax
    planning, and business succession planning.
    INSURANCE
    The first involves providing
    individuals or businesses with
    products that provide cash
    payments when unfavorable events
    occur.
    The second involves investing the
    premiums that customers pay
    when they buy insurance.

    Insurance Agent, Underwriter, Claims Adjuster,


    Unit Manager
    INVESTMENT BANK
    Make markets for financial
    securities (e.g., stocks and bonds)
    and provide financial advice to and
    manage financial assets for high net
    worth individuals, firms,
    institutions, and governments.

    Research Analyst, Associate, Fund Manager, Chief


    Investment Officer, Managing Director
    INVESTMENT MANAGEMENT
    The role of an investment manager
    includes elements of financial analysis,
    asset selection, security selection, and
    investment implementation and
    monitoring.

    Security Analyst, Senior Analyst, Compliance


    Officer, Portfolio Manager, Partner
    0927.755.2285

    Financial Analysis & Reporting PLV BSBA FM Prof. Divine Matibag Cabaddu

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