week 1a.b, ipm (1)
TRANSCRIPT
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INVESTMENT & PORTFOLIOINVESTMENT & PORTFOLIO
MANAGEMENTMANAGEMENT
Course Instructor :Syeda Mahlaqa Hina
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The CourseThe Course
INVESTMENT
ANALYSIS PORTFOLIO
MANAGEMENT
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WEEK 1WEEK 1
Understanding
Investments
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Learning ObjectivesLearning Objectives
Define investment and discuss what it means
to study investments.
Explain why risk and return are the twocritical components of all investing decisions.
Outline the two-step investment decision
process.
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Investments DefinedInvestments Defined
Investment is a process in which an asset or item is
purchased with the hope that it will generate income
in the future.
Investment is the purchase of goods that are not
consumed today but are used in the future to create
wealth.
Money committed or property acquired for future
income.
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ContdContd
Investments is the study of the process of
committing funds to one or more assets
Emphasis on holding financial assets and
marketable securities
Concepts also apply to real assets
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Investment ObjectivesInvestment Objectives
Primary Objectives
Safety of principal
Income Growth of capital
Secondary Objectives
Liquidity
Tax minimization
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Cont`dCont`d
As we have seen from each of the five objectives
discussed above, the advantages of one often
comes at the expense of the benefits of another. If
an investor desires growth, for instance, he or shemust often sacrifice some income and safety.
Therefore, most portfolios will be guided by one pre-
eminent objective, with all other potential objectivesoccupying less significant weight in the overall
scheme.
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Why Study Investments?Why Study Investments?
Most individuals make investment decisions
sometime
Individuals need sound framework for managing
and increasing wealth
Essential part of a career in the field
Security analyst, portfolio manager, investment
advisor, financial planner, Chartered FinancialAnalyst
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Underlying investment decisions: the tradeoff
between expected return and risk
Return: expected return is not usually the same as
realized return
Risk: the possibility that the realized return will be
different than the expected return
Investment DecisionsInvestment Decisions
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Investors manage risk
at a cost lower
expected returns (ER)
Any level of expected
return and risk can be
attained
Risk
ER
Risk-free Rate
Bonds
Stocks
The Tradeoff Between ER and RiskThe Tradeoff Between ER and Risk
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Two-step process: Security analysis
Necessary to understand security characteristicsand applied to these securities to estimate theirprice or value or
Examine Securities
Portfolio management Selected securities viewed as a single unit How and when should it be revised? How should portfolio performance be measured?
The Investment Decision ProcessThe Investment Decision Process
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ContdContd
Portfolio Management is the art and science
of making decisions about investment mix
and policy, matching investments toobjectives, asset allocation for individuals
and institutions, and balancing risk against.
performance.
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ContdContd
Portfolio management is all about strengths,
weaknesses, opportunities and threats in the
choice of debt vs. equity, domestic vs.
international, growth vs. safety, and many other
tradeoffs encountered in the attempt to maximize
return at a given appetite for risk.
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Good Luck !!