Vikrant Insititute of Managemant: Submitted by

VIKRANT INSITITUTE OF MANAGEMANT
Presentation Topic- Investment Process
Submitted By
Indu Kaushik Ritu sharma MBA 3rd sem
The Life of every man is a diary in which he means to write one story, and writes another; and his humblest hour is when he compares the volume as it is with what he vowed to make it. - J.M. Barrie
INDEX
Investment Investment Objectives Investment Process Purpose of portfolio management Low risk vs. high risk investments The portfolio managers job The six steps of portfolio management
INVESTMENT
1. What is Investment ?
When a person has more money than he requires for current consumption, he would be coined as 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 . All of these activities in broader sense mean Investment.
Investment Objectives
1. 2. 3. 4. Risk Return Safety Liquidity
RISk- The risk depend on the following factors: 1. The longer the maturity period, 2. The nature of instrument. 3. The nature of tax liability on the instrument.
Return- if Rs. 25 is dividend on the share of the fase value of Rs. 100 but purchase at Rs. 150 then the return is 25/150 = 16.67%
Investment Objectives
Safety- the selected investment should be under the
legal and regulatory frame work if it is not under the legal frame work, it is difficult to represent the compensation, if any. Approval of the law itself adds a flavour of safety. Investment done with the government assure more safety then with the private party.
Liquidity- The liquidity depend upon the trading

facility. If a portion of the investment could be converted into cash without much loss of time.
Investment Process
FIVE STEP OF INVESTMENT PROCESS:
SETTING INVESTMENT POLICY PERFORMING SECURITY ANALYSIS CONSTRUCTING A PORTFOLIO REVISING THE PORTFOLIO EVALUATING THE PORTFOLIO
SETTING INVESTMENT POLICY

DETERMINE THE INVESTMENT OBJECTIVE
estimate the clients level of risk tolerance
PERFORMING SECURITY ANALYSIS

Market Analysis the stock prices may be
fluctuating in short run but in the long run they move trends i.e.either upwards or downwards.
Industry Analysis the industries that contribute to

the output of the major segments of the economy vary in their growth rates and their overall contribution to economic activity.the economic significance and the growth potential of the industry have to be analysed.
Company Analysis the purpose of the

company analysis is to help the investors to make better decisions. company with high product market share is able to create wealth to the investors in form of capital appreciation.
CONSTRUCTING OF PORTFOLIO
A portfolio is a combination of securities. the portfolio is constructed in such a manner to meet the investors goals and objectives. the investor should decide how best to reach the goals with the securities available . The investor tries to attain maximum return with minimum risk.
REVISING THE PORTFOLIO

Revision depends on the results of the appraisal. The low yielding securities with high risk are replaced with high yielding securities with low risk factor.
EVALUATING THE PORTFOLIO

The portfolio has to be managed efficiently. The efficiently management calls for evaluation of the portfolio. this process consists of portfolio appraisal and revison.
Purpose of portfolio management

Portfolio management primarily involves reducing risk rather than increasing return
Consider two $10,000 investments: 1)Earns 10% per year for each of ten years (low risk)
2)Earns 9%, -11%, 10%, 8%, 12%, 46%, 8%, 20%, -12%, and 10% in the ten years, respectively (high risk)
Low Risk vs. High Risk Investments

$30,000
$25,937 $23,642
$20,000
$10,000
$10,000
Low Risk High Risk
$0 '92 '94 '96 '98 '00 '02
Low Risk vs. High Risk Investments

1) Earns 10% per year for each of ten years (low risk)
Terminal value is $25,937
2) Earns 9%, -11%, 10%, 8%, 12%, 46%, 8%, 20%, -12%, and 10% in the ten years, respectively (high risk)
Terminal value is $23,642
The lower the dispersion of returns, the greater the terminal value of equal investments
Portfolio Management is like gardening

Design Select Maintain
Harvest
The Portfolio Managers Job

Begins with a statement of investment policy, which outlines:
Return requirements Investors risk tolerance Constraints under which the portfolio must operate

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VIKRANT INSITITUTE OF MANAGEMANT

Presentation Topic- Investment Process

Liquidity- The liquidity depend upon the trading

SETTING INVESTMENT POLICY

estimate the clients level of risk tolerance

PERFORMING SECURITY ANALYSIS

Industry Analysis the industries that contribute to

Company Analysis the purpose of the

REVISING THE PORTFOLIO

EVALUATING THE PORTFOLIO

Purpose of portfolio management

Low Risk vs. High Risk Investments

Low Risk High Risk

$0 '92 '94 '96 '98 '00 '02

Low Risk vs. High Risk Investments

Portfolio Management is like gardening

The Portfolio Managers Job

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