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Introduction • When a person has more money than he requires for current consumption, he would be coined as a potential investor. The investor who is having extra cash could invest it in securities or in any other assets like gold or real estate or could simply deposit it in his bank account. The companies that have extra income may like to invest their money in expansion of existing firm or undertake new venture. All of these activities in broader sense means investment.
Investment • Investment is the employment of funds on assets with the aim of earning income or capital appreciation. Investment has two attributes namely time and risk. Present consumption is sacrificed to get a return in the future. It is for the long term Or we can say if a person buys a stock for dividend it may be called investment.
Speculation • Speculation means taking up the business risk in the hope of getting short term profits. Speculation essentially involves buying and selling activities with the expectation of getting profits from the price fluctuation.
Gambling • If person buys stock for intra day profit we can say that he is gambling. Gambling is for short period of time that is few hours or few mins or few seconds. Person tries to take advantage of fluctuations which happen daily in split second of time.
Investment objective • The main objective are increasing rate of return and reducing the risk. We can say that the objectives of investmentsare: • Return • Risk • Liquidity • Hedge against inflation • safety
The investment process • The investment process involves a series of activities leading to the purchase of securities or other investment alternatives. The investment process can be divided into five stages • Framing of investment policy • Investment analysis • Valuation • Portfolio construction • Portfolio evaluation
