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
investments are:
1. Return
2. Risk
3. Liquidity
4. Hedge against inflation
5. 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
1. Framing of investment policy
2. Investment analysis
3. Valuation
4. Portfolio construction
5. Portfolio evaluation
Framing of investment policy
Investible
funds
Objectives
knowledge
Security analysis
Market
analysis
Industry
analysis
Company
analysis
Valuation
Future value
Construction of portfolio
• Debt and equity
diversification
Diversification • Industry diversification
• Company diversification
• selection
Evaluation
Appraisal
Revision
securities
Various types of
securities are
traded in the
market. Security
provides a claim on
an asset and any
future cash flows
the assets may
generate. The
securities can be
fixed and variable
income securities.
• Equity shares
• Sweat equity shares
• Non-voting shares
• Right shares
• Bonus shares
Preference stock
Cumulative preference shares
Non-cumulative preference shares
Convertible preference shares
Redeemable preference shares
Irredeemable preference shares
Cumulative convertible preference shares
Debentures
Characteristics
of debentures
• Form : in form of
certificate
• Interest
• Redemption
• Indenture: trust deed
Types of debentures
Secured or unsecured
Fully convertible
Partly convertible debenture
Non-convertible debenture
Bond
Secured and unsecured bonds
Perpetual bonds and redeemable bonds
Fixed interest rate bonds and floating interest rate bonds
Zero coupon bonds
Deep discount bonds
Capital indexed bonds
Investment information
International affairs
National affairs
Industry information
Company information
Stock market information