I – Definitions

1. Investment management refers to the handling of financial assets and other investments—not
only buying and selling them. Management includes devising a short- or long-term strategy for
acquiring and disposing of portfolio holdings. It can also include banking, budgeting, and tax
services and duties, as well.
The term most often refers to managing the holdings within an investment portfolio, and the
trading of them to achieve a specific investment objective. Investment management is also
known as money management, portfolio management, or wealth management.

2. An investment is an asset or item acquired with the goal of generating income or appreciation.
Appreciation refers to an increase in the value of an asset over time. When an individual
purchases a good as an investment, the intent is not to consume the good but rather to use it in
the future to create wealth.

An investment always concerns the outlay of some capital today—time, effort, money, or an
asset—in hopes of a greater payoff in the future than what was originally put in.

3. A investment Portfolio is ownership of a stock, bond, or other financial asset with the
expectation that it will earn a return or grow in value over time, or both. It entails passive or
hands-off ownership of assets as opposed to direct investment, which would involve an active
management role.

4. Investment as Hedge against inflation To take steps to limit the reduction of the value of an
investment due to inflation. Inflation decreases the value of money such that an investment's
return is not worth as much as it might have been when the investment was made originally.
Hedging against inflation helps reduce this pressure. Examples of hedging against inflation
include buying commodities such as gold or purchasing an inflation-protected security, in which
the return is linked to the inflation rate.

5. Inflation is the decline of purchasing power of a given currency over time. A quantitative
estimate of the rate at which the decline in purchasing power occurs can be reflected in the
increase of an average price level of a basket of selected goods and services in an economy over
some period of time. The rise in the general level of prices, often expressed as a percentage,
means that a unit of currency effectively buys less than it did in prior periods.

6. We can define compound growth as the average rate of growth experienced by an investment
over a multi-year period. One way to think about the compound growth rate is that it takes all
the hills and valleys into account when considering the investment landscape. As we saw in our
opening example, averaging year-end growth rates cannot provide us with an accurate measure
of compound growth over several years.

7. Investable assets include cash, funds in your bank accounts, money held in retirement accounts,
mutual funds, stocks, bonds, certificates of deposit, and insurance contracts with cash value.
Excluded from investable assets are those not easily converted to cash, also known as physical
 or tangible assets. They include items like real estate properties, automobiles, art, jewelry,
furniture, and collectibles. In short, measuring your worth in investable assets tells you how
much money you have if you don't sell your belongings or properties.

8. Liquidity buffers refer to banks’ stock of liquid assets, such as central bank reserves or
high-quality government debt that can be easily used to repay obligations as they fall due.
They are available to meet unexpected changes in cash flows.
These liquidity buffers include liquid assets used to satisfy the internationally agreed
Liquidity Coverage Ratio (LCR) standard as well as additional bank-specific guidance

9. Risk tolerance is the degree of variability in investment returns that an investor is willing to
withstand in their financial planning. Risk tolerance is an important component in investing. You
should have a realistic understanding of your ability and willingness to stomach large swings in
the value of your investments; if you take on too much risk, you might panic and sell at the
wrong time.
Risk tolerance is often associated with age, although that is not the only determining factor.
However, in a general sense, people who are younger and have a longer time horizon are often
able to and are encouraged to take on greater risk than people older with a shorter-term
horizon.

10. Diversification in Investment is the practice of spreading your investments around so that your
exposure to any one type of asset is limited. This practice is designed to help reduce the
volatility of your portfolio over time.

One of the keys to successful investing is learning how to balance your comfort level with risk
against your time horizon. Invest your retirement nest egg too conservatively at a young age,
and you run the risk that the growth rate of your investments won't keep pace with inflation.
Conversely, if you invest too aggressively when you're older, you could leave your savings
exposed to market volatility, which could erode the value of your assets at an age when you
have fewer opportunities to recoup your losses.

One way to balance risk and reward in your investment portfolio is to diversify your assets. This
strategy has many complex iterations, but at its root is the simple idea of spreading your
portfolio across several asset classes. Diversification can help mitigate the risk and volatility in
your portfolio, potentially reducing the number and severity of stomach-churning ups and
downs.

11. Over-diversification occurs when each incremental investment added to a portfolio lowers the
expected return to a greater degree than the associated reduction in the risk profile. In a sense,
an investor can hold so many investments that instead of diversifying their portfolio, they've
engaged in a bit of "di-worsification" where their portfolio is worse off because there's no added
benefit to the incremental investments owned above a certain level.
 Over diversification is possible as some mutual funds have to own so many stocks (due to the
large amount of cash they have) that it’s difficult to outperform their benchmarks or indexes.

12. Laddered Investing - laddering investment strategy that involves buying bonds with different
maturity dates so that the investor can respond relatively quickly to changes in interest rates. It
reduces the reinvestment risk associated with rolling over maturing bonds into similar fixed
income products all at once. It also helps manage the flow of money, helping to ensure a steady
stream of cash flows throughout the year.
laddering investment offers steady income in the form of those regularly occurring interest
payments on short-term bonds. It also helps lower risk, as the portfolio is diversified because of
the various maturation rates of the bonds it contains.

13. Offensive Investment - offensive or aggressive investment strategy, by contrast, an investor tries
to take advantage of a rising market by purchasing securities that are outperforming for a given
level of risk and volatility.
An offensive strategy may also entail options trading and margin trading.

14. Defensive investment - defensive investment strategy entails regular portfolio rebalancing to
maintain an intended asset allocation. It also involves buying high-quality, short-maturity bonds
and blue-chip stocks; diversifying across sectors and countries; placing stop loss orders; and
holding cash and cash equivalents in down markets. Such strategies are meant to protect
investors against significant losses from major market downturns.

15. Time Horizon - An investment time horizon, or just time horizon, is the period of time one
expects to hold an investment until they need the money back. Time horizons are largely
dictated by investment goals and strategies. For example, saving for a down payment on a
house, for maybe two years, would be considered a short-term time horizon, while saving for
college would be a medium-term time horizon, and investing for retirement, a long-term time
horizon.

16. A portfolio manager is a person or group of people responsible for investing a mutual, exchange
traded or closed-end fund's assets, implementing its investment strategy, and managing day-to-
day portfolio trading. A portfolio manager is one of the most important factors to consider when
looking at fund investing. Portfolio management can be active or passive, and historical
performance records indicate that only a minority of active fund managers consistently beat the
market.

17. Investment Mix - The investment world has a wide array of financial products to choose from, all
with their own benefits and risks. Investors can decide how they would like to invest their
capital; whether they want to be concentrated in one asset, such as stocks, or if they would like
to have an asset mix, investing in a variety of assets, thereby increasing their potential for
returns as well as reducing their risk, a strategy known as diversification.
18. The term credit rating refers to a quantified assessment of a borrower's creditworthiness in
general terms or with respect to a particular debt or financial obligation. A credit rating can be
assigned to any entity that seeks to borrow money—an individual, a corporation, a state or
provincial authority, or a sovereign government.

19. Financial Limitations

- Limitation of financial accounting refers to those factors which may averse the user of the
financial statements, be it investors, management, directors and all other stakeholders of
the business, in arriving at any decision by simply relying on financial accounts only.

It shall be correct to say that limitations of financial accounting

20. Financial markets refer broadly to any marketplace where the trading of securities occurs,
including the stock market, bond market, forex market, and derivatives market, among others.
Financial markets are vital to the smooth operation of capitalist economies.

-Financial markets play a vital role in facilitating the smooth operation of capitalist economies by
allocating resources and creating liquidity for businesses and entrepreneurs. The markets make
it easy for buyers and sellers to trade their financial holdings. Financial markets create securities
products that provide a return for those who have excess funds (Investors/lenders) and make
these funds available to those who need additional money (borrowers).