1 / 13

FUNDAMENTALS OF INVESTMENTS 3 rd Edition Sharpe, Alexander, and Bailey

FUNDAMENTALS OF INVESTMENTS 3 rd Edition Sharpe, Alexander, and Bailey. Power Point Presentations prepared By Joseph F. Greco, Ph.D. California State University, Fullerton. Chapter One. Introduction. The Investment Environment. What are securities?

toby
Download Presentation

FUNDAMENTALS OF INVESTMENTS 3 rd Edition Sharpe, Alexander, and Bailey

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. FUNDAMENTALS OF INVESTMENTS3rd EditionSharpe, Alexander, and Bailey Power Point Presentations prepared By Joseph F. Greco, Ph.D. California State University, Fullerton

  2. Chapter One Introduction

  3. The Investment Environment • What are securities? • Definition:a legal representation of the right to received prospective future benefits under stated conditions.

  4. The Investment Environment • Calculating the RATE OF RETURN : R = (p1 - p0)/ p0 where R = the rate of return P0 = the beginning price P1 = the ending price

  5. The Investment Environment • Types of securities: • Treasury bills • Long term bonds • Common stocks

  6. The Investment Environment • Risk, return, and diversification. • The fundamental principle. • Combining securities in a portfolio. • Results in a lower level of risk. • Than a simple average of the risks of each.

  7. The Investment Environment • Security markets: • Function: meeting place for buyers and sellers • Types of markets based on issuer: • Primary • Secondary

  8. Five steps: Set investment policy Perform security analysis Construct a portfolio Revise the portfolio Evaluate performance The Investment Process

  9. STEP 1: Investment Policy • Identify investor’s unique objective • Determine amount of investable wealth • State objectives in terms of risk and return • Identify potential investment categories

  10. Step 2: Security Analysis • Using potential investment categories, find mispriced securities • Using fundamental analysis • Intrinsic value should equal discounted present value • Compare current market price to true market value • Identify undervalued securities

  11. Step 3: Construct a Portfolio • Identify specific assets and proportion of wealth in which to invest • Address issues of • Selectivity • Timing • Diversification

  12. Step 4: Portfolio Revision • Periodically repeat step 3 • Revise if necessary • Increase/decrease existing securities • Delete some securities • Add new securities

  13. Step 5: Portfolio Performance Evaluation • Involves periodic determination of portfolio performance with respect to risk and return • Requires appropriate measures of risk and return

More Related