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Security Analysis AND Portfolio Management: Mba Iii Semester Prist

This document provides an overview of investment, speculation, and gambling. It discusses investment objectives like return, risk, liquidity, and safety. It differentiates between investors and speculators based on time horizon, risk tolerance, return expectations, and use of funds. The investment process outlined includes developing an investment policy, analyzing securities, valuating investments, constructing a portfolio, and evaluating portfolio performance over time. Key factors that influence investment selection are also identified.

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Singh Charu
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208 views15 pages

Security Analysis AND Portfolio Management: Mba Iii Semester Prist

This document provides an overview of investment, speculation, and gambling. It discusses investment objectives like return, risk, liquidity, and safety. It differentiates between investors and speculators based on time horizon, risk tolerance, return expectations, and use of funds. The investment process outlined includes developing an investment policy, analyzing securities, valuating investments, constructing a portfolio, and evaluating portfolio performance over time. Key factors that influence investment selection are also identified.

Uploaded by

Singh Charu
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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SECURITY ANALYSIS

AND
PORTFOLIO MANAGEMENT

MBA III SEMESTER PRIST


ASST.PROF JAYASHREE KOWTAL
INTRODUCTION TO INVESTMENT

SESSION NO - 1
What Is Investment ?
• For a layman, investment means some monetary
commitment.

• Investment is the employment of funds on assets with


the aim of earning income or capital appreciation
• Attributes of Investments are
Time – present consumption is sacrificed to get a
return in the future
Risk – with a view to reap some return from the
investment
What is Speculation ?
• Taking up the business risk in the hope of
getting short term gain.
• It involves buying and selling activities with
the expectation of getting profit from the
price fluctuations
• Speculator Is interested in abnormal gain
• Evaluation of price movement
• Match risk and return
What is Gambling ?
• A gamble is usually a very short term
investment in a game or chance.
• Results are determined by the roll of dice or
turn of card
• Gambling employs artificial risks whereas
commercial risks are present In the
investment activity
Investment Objectives-1
• Return – total income of the investor receives
during the holding period stated as percentage of
the purchasing price at the beginning of the
holding period
• Risk – risk is the variability of return
• Liquidity – marketability of the investment
provides liquidity to the investment
• Safety – selected investment avenue should be
under the legal and regulatory frame work.
Approval of law provides the safety to the
investments
Investment Objectives -2
• Hedging against inflation- rate of return
should ensure a cover against the inflation.
• growth stocks would appreciate in their
values overtime and provide a protection
against inflation
• return earned should assure the safety of the
principal amount, regular flow of income and
be a hedge against inflation
Investor and Speculator
Basis of difference Investor speculator

Time horizon Plans for a longer time Plans for a very short
horizon. Holding period period. Holding period
may be from one year to varies from few days to
few years months
Risk Assume moderate risk Willing to undertake
high risk
Return Likes to have moderate Like to have high return
rate of return associated for assuming high risk
with limited risk
Decision / Funds Considers fundamental Considers inside
factors and evaluates information, here says
the performance of the and market behaviour
company regularly./
uses his own funds and Uses borrowed funds to
avoids borrrowed funds supplement his personal
resources
The Investment Process
Investment Process

Portfolio Portfolio
Investment Analysis Valuation
construction Evaluation n
policy

August 18th 2010 MSRIM,BANGALORE 9


Investment Policy
• Government or the investor formulates the
policy for systematic functioning
• 1. Investible funds
• 2. objectives
• 3. knowledge
Security Analysis
• Securities to be bought to be scrutinized
through the market industry and company
analysis
• 1. Market analysis
• 2. Industry analysis
• 3. Company analysis
Valuation
• Valuation helps the investor to determine the
return and risk expected from an investment
in the common stock, The intrinsic value of
the share is measured through the book value
of the share and price earning ratio
• 1.Intrinsic value
• 2.Future value
Construction of portfolio
• Combination of securities based on the
investors goals and objectives
• 1.Diversification
• 2.Debt and equity diversification
• 3.Industry diversification
• 4.company diversification
• 5.Selection
Portfolio Evaluation
• Efficient management calls for evaluation of
the portfolio
• 1. Appraisal
• 2.Revision
Factors Influencing selection of
Investment
• 1. Return
• 2.Capital Appreciation- conservation-
Aggressive growth and speculation
• Form of Return – Periodic Cash Receipts and
Capital gain
• 3.Safety and Security of Funds – Risk,
Liquidity, Tax Benefits, conceivability and
Adequate Liquidity and collateral Value

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