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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 !!