INVESTMENT MANAGEMENT

UNIT I

Investment Management

Meaning:It is the part of saving of an individual that

is in the form of funds to be used in future terms. It is the allocation of monetary resource to assets that expected to yield some gain or positive return over a period of time.

Importance of Investment

• Longer life expectancy• Increasing rates of taxation• Interest rates • Inflation• Income• Investment channels

Factors favourable for investment

• Legal safeguards• Stable currency• Existence of financial institutions to encourage

savings• Form of business organization

Features of investment program

1. Safety of principal2. Liquidity3. Income stability4. Appreciation and purchasing power stability5. Legality and freedom from care6. tangibility

Speculation

Meaning of speculation:It’s the involvement of funds of high risk

as it includes:1. Risk2. Capital gain3. Time examples of speculation: lottery ticket, gambling

Investment Vs. Speculation

Investment• Investment is employment

of fund• It is the waiting for the

reward• It used for current

consumption to be used in future

• It is a long tem commitment

Speculation• It involves high risk fund

• Due to risk reward is not fully considered

• Current consumption cannot be used in future

• Its short term commitment

UNIT II

Forms of investment

• Small savings schemes• Post office schemes• National saving schemes

Saving depositFixed depositRecurring depositSavings certificate Indiravikas patraKisan vikas patra

Bank Deposits

• Savings bank account• Current account• Recurring deposit• Fixed deposit• Mutual fund

Company deposits

Company deposits:It is the fixed deposit investment schemes offered

by various companies like private and public. It includes Name of the company Date of the incorporationType of businessDetails of the companyName and address Profit and dividend description

Equity Shares

Equity Shares:Equity Shares are common shares enjoyed by the

investor and it has a equal rights to be used by the shareholder.Characteristics of Equity shares:Voting rightsOwnership rightsPar valueRights sharesTax benefit

Advantages of Equity investment

• Easy transferable • Liability• Profit potentiality• Purchasing power • Risk• No repayment• Immunity• Better corporate governance• Easy exit

Disadvantages of Equity investment

• Loss decision making power• Loss of control• Regulatory compliance• Higher outgo• Life long obligation

Govt Securities

Govt Securities:Issued only by the central government, state government

and semi government authorities.Ex: Gold bond, national defense bond, special rupee securities.Characteristics of Govt Securities: Issuing authority Stock market Commercial bank Rate of interest Financial institution underwriting

Mutual FundMutual Fund:

It is a concept based on sharing of risk and reward. The securities are subject to market risk.Types of Mutual Fund: Open ended mutual fund Closed ended mutual fundUnits:

It is the mobilization of savings from the house hold sector and re investing in different channels. Ex: UTIObjectives of units: Safety Growth in dividend liquidity

Insurance

Insurance:Insurance is the protection against the risk.

It is the element of investment. It has tax benefit.

Gold and silver

Gold:Gold is the valuable asset in our daily

economy of life and it is used in various forms for the purpose of investment. Its value increased or decreased depends upon the economic condition. Ex: Gold coins Gold Bar and jewels. Silver:

silver may be in the form of weight by the kilo gram. Silver may be less then the price of gold.

Real Estate

Real Estate:Land and house property is called as real

estate. This investment taken by large number of people for hedging the inflation rates.Principles of investing in real estate:priceSupply of landTaxLand has collateral value

UNIT-III

New issue marketThe new issue market plays a crusial role in channelising the

surplus funds or savings in to investing units for productive purpose, which ultimately helps in economic development and

growth.

ROLE OF THE NEW ISSUE MARKET

ORGINATIONUNDERWRITINGDISTRIBUTION

IMPORTANCE OF NEW ISSUE MARKET

UNIT-IV

STOCK EXCHANGE

MEANING

The secondary market consists of stock exchanges where existing securities are bought and sold. The securities of a government are traded in gilt-edged market.

DEFINITION “Stock exchange or securities market comprises of all the

places where buyers and sellers of their representatives undertake tranctions involving the sle of securities.” –Hastings.

DEFINITION

“The organised securities exchanges are market places open

only to members most whom are brokers acting for buyers and

sellers of the stocks and bonds permitted in the market.”-

Guthmann and Dougall.

“An association, organisation or bodyof individuals whether

incorporated or not, established for the purpose of

assisting,regulating and controlling businessin buying or dealing

in securities.:-The Securities Contracts (Regulation)Act,1956.

FUNCTIONS OF STOCK EXCHANGEReady market for Securities

Facilities Healthy

Speculation

Regulation & movtivation of

companies

Facilitates capital

Formation

Indicators of business progress

Safety of Investment

Evaluation of Securities

Characterstics of securities

Important characterstics

• In association of individuals.• Control by governing body.• Abiding by rules and regulations.• Listed securities.

LIST OF OF STOCK IN INDIA

• NATIONAL STOCK EXCHANGE• BOMBAY STOCK EXCHANGE• OTCEI• CALCUTTA STOCK EXCHANGE• DELHI STOCK EXCHANGE

LISTING OF SECURITIES

Meaning: Listing means the admission of the security of a public limited company on a recognised stock exchange for trading.

Objectives of listing:• To provide marketability, liquidity and transferability

to the securities• To ensure fair dealings in securities• To safeguard the interest of the investors and the

general investing public.

Advantages of listing of securities

• Broadens and diversifies shareholdings

• Complies with statutory provisions

• Ensures a savings in the cost of raising new capital.

Procedures for listing of securities

• Attaching listing application and documents

• Scrutiny of listing application

• Listing agreement

Stock Brokers

Meaning:Brokers are the main players in the

secondary market. They act in varying capacities such as principle, agent and speculator or oterwise jobber, tarawaniwals, commission brokers, sub-brokers and authorised clerks.

Functions of Stock Brokers

Mechanics of Security trading in Stock Exchange

• Choosing a broker• Opening an account with broker• Placing orders• Execution of orders• Preparation of contract notes• Settlement of traansaction

Investment Risk

Meaning: Risk is the oppsit of the safety otherwise the possibility of loss or injury. The degree or probability of such laws.

Classification of Risk

Classification of Risk

Market Interest Rate Purchasing Risk Risk power risk

Business Risk Financial Risk Default or Insolvency Risk

Internal Busines External Business Risk Risk