Investment: Investment is the commitment of the funds to one or more assets that will be held over some future time period. Investment is the current commitment of the money for a period of time to derive future payment that will compensate the investor for 1) the time the funds are committed 2) expected rate of inflation 3) the uncertainty of future payment. Characteristics of the Investment/Attributes to be Considered: • Return • Risk • Safety • Liquidity • Hedge against Inflation • Tax Shelter • Convenience Various Forms of the Investment • Corporate Securities • Equity Share • Preference Share • Debentures • Corporate Bonds • Commercial Papers • Repos and Reverse Repos • Certificate of Deposits • Deposit in Banks and Non- Banking Companies • Mutual Funds and Other Investment Companies • Post Office Deposit • Life Insurance Policies • Provident Fund Schemes • Government Securities: • Treasury Bills • Government Bonds • Derivatives • Real Estate • Art and Antiques • Foreign Currency Investments • Metals and Stones Source of Investment Uncertainties: • Economic Specific Factor • Industry Specific Factor • Company Specific Factor Economic Specific Factors: • Growth Rate of National Income • Inflation • Interest Rates • Government Revenue, Expenditure and Deficits • Exchange Rate • Infrastructure • Natural Circumstances • Political and Economical Policies • Norms of Regulatory Authorities • Dependency on Foreign Countries • International Financial Environment Approaches to the Investment Decision Making • Fundamental Approach • Technical Approach • Psychological Approach • Academic Approach • Eclectic Approach Approaches of the Investment • Aggressive Approach • Conservative Approach • Balanced Approach CAPITAL MARKET PRIMARY MARKET SECONDARY MARKET MARKET Public Corporate Existing Stockholders Other Entities Stock & Shares Debentures Units Bonds Warrants Collective Investment Instruments Venture Capital Funds Global Depository Receipts Merchant Bankers Underwriter Portfolio Manager Debenture Trustees Bankers to an Issue Registrars to an Issue Share Transfer Agents Rating Agencies INSTRUMENTS MARKET Recognized Stock Exchanges Spot Market Stock & Shares Debentures Units Bonds Futures and Options Derivatives Stock Brokers Sub Brokers INSTRUMENTS SOURCE OF FUNDS Individuals Businesses Public Sector Entities MARKET PARTICIPATNTS Individuals Mutual Funds UTI Banks NBFCs Dev. Institutions Firms Foreign Investors Corporate LIC Others OTHERS Securities Depositories Custodians of Securities SELF REGULATORY ORGANISATIONS AMFI AMBI ACAI etc. INTERMEDIARIES INTERMEDIARIES Investment Process: Investment Objective Investment Strategy Selection of Securities Portfolio Construction Portfolio Evaluation Portfolio Revision Common Error in Investment Management • Inadequate Comprehension of Return and Risk • Inappropriate Formulation of Investment Policy • Naive Extrapolation of the Past • Haphazard Decision Making • Untimely Entries and Exit • High Costs • Over Diversification or Under Diversifications • Wrong Attitude towards Losses and Profits Qualities for Successful Investing • Contrary Thinking • Patience • Diversify • Flexibility and Openness • Decisiveness