The document provides an introduction to investment and portfolio management. It defines key terms like individual investor, investment, economic investment, and financial investment. It discusses the different objectives of investment such as financial objectives, personal objectives, and objectives based on the investor's approach like short-term vs long-term priorities. It also covers the concepts of portfolio, the investment process of setting policies, analyzing investments, creating a diversified portfolio, revising it over time, and evaluating performance. It distinguishes between investment and speculation.

1. Introduction to
Investment &
Portfolio
Management
By
Shaik Mohammad Imran
SHAIK MOHAMMAD IMRAN

2. Content
a) Introduction
b) Definition of Individual Investor
c) Meaning of Investment
d) Concepts of Investment
a) Economic Investment
b) Financial Investment
e) Investment Objectives
a) Classification of Objectives
b) classified on the basis of the investors approach
objectives with regard to the investment of their
capital.
SHAIK MOHAMMAD IMRAN

3. INTRODUCTION
For most of the investors throughout their life, they will be earning
and spending money. Rarely, investor’s current money income
exactly balances with their consumption desires. Sometimes,
investors may have more money than they want to spend; at other
times, they may want to purchase more than they can afford. These
imbalances will lead investors either to borrow or to save to
maximize the long-run benefits from their income.
SHAIK MOHAMMAD IMRAN

4. INTRODUCTION
An investment is the current commitment of rupee for a period of
time in order to derive future payments that will compensate the
investor for
(1) The time the funds are committed,
(2) The expected rate of inflation, and
(3) The uncertainty of the future payments.
SHAIK MOHAMMAD IMRAN

5. Definition of Individual investor
“An individual who purchases small amounts of securities for
themselves, as opposed to an institutional investor, Also called as
Retail Investor or Small Investor.”
In today’s world everybody is running for money and it is considered as a root of
happiness. For secure life and for bright future people start investing. Every time
investors are confused with investment avenues and their risk return profile. So,
even if Researcher focuses on past, present or future, investment is such a topic
that needs constant upgradation as economy changes.
SHAIK MOHAMMAD IMRAN

6. MEANING OF INVESTMENT
• Investment is the employment of funds with the aim of getting
return on it.
• In general terms, investment means the use of money in the hope
of making more money.
• In finance, investment means the purchase of a financial product
or other item of value with an expectation of favourable future
returns.
SHAIK MOHAMMAD IMRAN

7. There are Two concepts of
Investment:
1. Economic Investment
2. Financial Investment
SHAIK MOHAMMAD IMRAN

8. There are Two concepts of
Investment:
1.Economic Investment : The concept of economic investment means
addition to the capital stock of the society. The capital stock of the
society is the goods which are used in the production of other goods. The
term investment implies the formation of new and productive capital in
the form of new construction and producers durable instrument such as
plant and machinery. Inventories and human capital are also included in
this concept. Thus, an investment, in economic terms, means an increase
in building, equipment, and inventory.
SHAIK MOHAMMAD IMRAN

9. There are Two concepts of
Investment:
2.Financial Investment: This is an allocation of monetary resources to assets
that are expected to yield some gain or return over a given period of time. It
means an exchange of financial claims such as shares and bonds, real estate,
etc. Financial investment involves contrasts written on pieces of paper such
as shares and debentures. People invest their funds in shares, debentures,
fixed deposits, national saving certificates, life insurance policies, provident
fund etc. in their view investment is a commitment of funds to derive future
income in the form of interest, dividends, rent, premiums, pension benefits
and the appreciation of the value of their principal capital.SHAIK MOHAMMAD IMRAN

10. Investment Objectives
1. Classification of Objectives
1. Financial
2. Personal
2. Classified on the basis of the investors approach
3. objectives with regard to the investment of their
capital.
SHAIK MOHAMMAD IMRAN

11. INVESTMENT OBJECTIVES
Investing is a wide spread practice and many have made their
fortunes in the process. The starting point in this process is to
determine the characteristics of the various investments and then
matching them with the individuals need and preferences. All
personal investing is designed in order to achieve certain objectives.
These objectives may be tangible such as buying a car, house etc. and
intangible objectives such as social status, security etc.
SHAIK MOHAMMAD IMRAN

12. Classification of Objectives
Financial
Safety,
Profitability,
Liquidity
Personal
Status,
Dependents,
Educational requirements
Income,
Consumption
Provision for retirement
SHAIK MOHAMMAD IMRAN

13. The objectives can be classified on the basis of
the INVESTORS APPROACH as follows
a) Short term high priority objectives: Investors have a high priority
towards achieving certain objectives in a short time. For example, a
young couple will give high priority to buy a house. Thus, investors
will go for high priority objectives and invest their money accordingly.
b) Long term high priority objectives: Some investors look forward
and invest on the basis of objectives of long term needs. They want
to achieve financial independence in long period. For example,
investing for post retirement period or education of a child etc.
investors, usually prefer a diversified approach while selecting
different types of investments.SHAIK MOHAMMAD IMRAN

14. The objectives can be classified on the basis of
the INVESTORS APPROACH as follows
c) Low priority objectives: These objectives have low priority in
investing. These objectives are not painful. After investing in high
priority assets, investors can invest in these low priority assets. For
example, provision for tour, domestic appliances etc.
d) Money making objectives: Investors put their surplus money in
these kinds of investment. Their objective is to maximize wealth.
Usually, the investors invest in shares of companies which provide
capital appreciation apart from regular income from dividend.
SHAIK MOHAMMAD IMRAN

15. objectives with regard to the
investment of their CAPITAL.
The importance of each objective varies from investor to investor and
depends upon the age and the amount of capital they have. These
objectives are broadly defined as follows.
a. Lifestyle – Investors want to ensure that their assets can meet their
financial needs over their lifetimes.
b. Financial security – Investors want to protect their financial needs
against financial risks at all times.
c. Return – Investors want a balance of risk and return that is suitable
to their personal risk preferences.
SHAIK MOHAMMAD IMRAN

16. objectives with regard to the
investment of their CAPITAL.
d. Value for money – Investors want to minimize the costs of managing
their assets and their financial needs.
e. Peace of mind – Investors do not want to worry about the day to day
movements of markets and their present and future financial security.
Achieving the sum of these objectives depends very much on the
investor having all their assets and needs managed centrally, with
portfolios planned to meet lifetime needs, with one overall investment
strategy ensuring that the disposition of assets will match individual
needs and risk preferences.
SHAIK MOHAMMAD IMRAN

17. What is a 'Portfolio'
A portfolio is a grouping of financial assets such as stocks,
bonds and cash equivalents, as well as their funds counter
parts, including mutual, exchange-traded and closed funds.
SHAIK MOHAMMAD IMRAN

18. Investment Process
Investment management process is the process of managing money
or funds. The investment management process describes how an
investor should go about making decisions.
Investment management process can be disclosed by five-step
procedure, which includes following stages:
1. Setting of investment policy.
2. Analysis and evaluation of investment vehicles.
3. Formation of diversified investment portfolio.
4. Portfolio revision
5. Measurement and evaluation of portfolio performance.
SHAIK MOHAMMAD IMRAN

19. Investment Process
Setting of
investment
policy
Analysis and
evaluation of
investment
Formation of
diversified
investment
portfolio
Portfolio
revision
Measurement
and evaluation
of portfolio
performance
Source : Click Here
SHAIK MOHAMMAD IMRAN

20. 1. Setting of investment policy is the first and very important step in
investment management process. Investment policy includes setting
of investment objectives. The investment policy should have the
specific objectives regarding the investment return requirement and
risk tolerance of the investor.
2. Analysis and evaluation of investment When the investment policy
is set up, investor’s objectives defined and the potential categories of
financial assets for inclusion in the investment portfolio identified, the
available investment types can be analysed. Most frequently two
forms of analysis are used: technical analysis and fundamental
analysis.
SHAIK MOHAMMAD IMRAN

21. 3. Formation of diversified investment portfolio is the next step in investment
management process. In the stage of portfolio formation the issues of
selectivity, timing and diversification need to be addressed by the investor.
Selectivity refers to micro forecasting and focuses on forecasting price
movements of individual assets. Timing involves macro forecasting of price
movements of particular type of financial asset relative to fixed-income
securities in general. Diversification involves forming the investor’s portfolio for
decreasing or limiting risk of investment.
2 techniques of diversification:
• Random Diversification, when several available financial assets are put to the portfolio
at random;
• Objective Diversification when financial assets are selected to the portfolio following
investment objectives and using appropriate techniques for analysis and evaluation of
each financial asset.
SHAIK MOHAMMAD IMRAN

22. 4. Portfolio revision. This step of the investment management
process concerns the periodic revision of the three previous
stages. This is necessary, because over time investor with long-
term investment horizon may change his / her investment
objectives and this, in turn means that currently held investor’s
portfolio may no longer be optimal and even contradict with the
new settled investment objectives. Investor should form the
new portfolio by selling some assets in his portfolio and buying
the others that are not currently held. It could be the other
reasons for revising a given portfolio: over time the prices of the
assets change, meaning that some assets that were attractive at
one time may be no longer be so.SHAIK MOHAMMAD IMRAN

23. 5. Measurement and evaluation of portfolio performance. This
the last step in investment management process involves
determining periodically how the portfolio performed, in terms
of not only the return earned, but also the risk of the portfolio.
For evaluation of portfolio performance appropriate measures of
return and risk and benchmarks are needed. A benchmark is the
performance of predetermined set of assets, obtained for
comparison purposes. The benchmark may be a popular index of
appropriate assets – stock index, bond index.
SHAIK MOHAMMAD IMRAN

24. Investment and speculation
“Speculation is an activity, quite contrary to its literal meaning, in
which a person assumes high risks, often without regard for the
safety of their invested principal, to achieve large capital gains.” The
time span in which the gain is sought to be made is usually very
short. Investment involves putting money into an asset which is not
necessarily marketable in order to enjoy a series of returns. The
investor sacrifices some money today in anticipation of a financial
return in future. He indulges in a bit of speculation. There is an
element of speculation involved in all investment decisions.
However, it does not mean that all investments are speculative by
nature. Genuine investments are carefully thought out decisions. On
the other hand, speculative investment, are not carefully thought
out decisions. They are based on tips, and rumours.
SHAIK MOHAMMAD IMRAN

25. Speculation has a special meaning when talking about money. The person who speculates is
called a speculator. A speculator does not buy goods to own them, but to sell them later. The
reason is that speculator wants to profit from the changes of market prices. One tries to buy
the goods when they are cheap and to sell them when they are expensive. Speculation
includes the buying, holding, selling and short selling of stocks, bonds, commodities,
currencies, real estate collectibles, derivatives or any valuable financial instrument. It is the
opposite of buying because one wants to use them for daily life or to get income from them
(as dividends or interest). Speculation should not be considered purely a form of gambling,
as speculators do make an informed decision before choosing to acquire the additional risks.
Additionally, speculation cannot be categorized as a traditional investment because the
acquired risk is higher than average. More sophisticated investors will also use a hedging
strategy in combination with their speculative investment in order to limit potential losses.SHAIK MOHAMMAD IMRAN

26. SHAIK MOHAMMAD IMRAN