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INVESTMENT ANALYSISINVESTMENT ANALYSIS

Prof. Sairam A

(Accredited Management Teacher)

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Micro and Macro Economic ConceptsMicro and Macro Economic Concepts

y Investment - Macro Economics

Investment means the production of capitalgoods.

y Investment - Finance Term Investment means buying of Assets

y Investment - Oxford Dictionary

Investment means investing of money

y Investment - Individual Point of View

Investment refers to a money commitment ofsome sort

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Investment ObjectiveInvestment Objective

y Return

y Risk

y

Liquidityy Hedge against Inflation

y Safety

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Investment CharacteristicsInvestment Characteristics

y Risk

y Return

y Safety

y

Liquidityy Marketability

y Concealibility

y Capital Growth

y Purchasing power stabilityy Stability of income

y Tax Benefits

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Investment ProcessInvestment Process

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Problems in InvestmentProblems in Investment

y Inadequate comprehension of return and risk

y Investment policy is not clearly formulated

y Careless decision making in investment process

y Simultaneous switching of investment activity

y

Traditional trends affected to the investmenty Inadequate planning to buy cheap stocks

y Either over diversification or under diversification ofstock

y

Investors are ready to buying shares of familiarcompanies

y Wrong attitude towards losses and profits

y Tendency and difficulty to speculate to investments

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Investment StrategyInvestment Strategy

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Investment v/s SpeculationInvestment v/s Speculation

Basis Speculation Investment

Meaning A message expressing an opinion

based on incomplete evidence

The investing of money

Types of Contract Speculator is a owner of the

speculation

Investor is the creditor of the

investment

Length Commitment The length of commitment is

only short -term

The length of commitment is a

long term

Source of Income The source of income is

fluctuated resulting from the

changes in the market price

The source of income is

comparatively stable resulting

from the earnings of the

company

Quantity of Risk Risk is quite high Risk is comparatively lower

Stability of Income Income is uncertain and erratic Income is quite stable

Psychological Attitude of

Participants

Attitude is very daring and

careless

Attitude is a cautious and

conservative

Reasons for Purchase Unscientific analysis of intrinsic

worth

Scientific analysis of intrinsic

worth

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ArbitrageArbitrage

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GamblingGamblingy Gambling is taking risk in the hope of a

favorable outcome

y Gambling refers to an act of involving anelement of risk

y Gambling most often refers specifically tothe wagering of money on games of chanceor more broadly to engaging in high risk

behaviory Gambling involves taking on risk without

demanding compensation in the form ofincreased expected return

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Characteristics of GamblingCharacteristics of Gambling

y Gambling is a typical, chronic and repetitiveexperience

y Gambling absorbs all other interests

y The gambler displays persistent optimismwithout winning

y The gambler never steps while winning

y The gambler eventually take more risk

y The gambler seeks and enjoys a strange thrillfrom gambling

y The gambler seeks pleasure and pain fromgambling

y In gambling artificial and unnecessary risks arecreated

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InvestorInvestor

An investor isA person whose principal concern in the purchase of

a security is the minimizing of risk, compared to the

speculator who is prepared to accept calculated risk

in the hope of making better-than-average profits, or

the gambler who is prepared to take even greater

risks. More generally it refers to people who invest

money in investment products

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Investor Behavior/Qualities of InvestorInvestor Behavior/Qualities of Investor

Safety PlayersEntrepreneurs

OptimistsHunters

AchieversPerfectionists

ProducersHigh Rollers

Money MastersAdventurersCelebrities

IndividualistsGuardians

Straight Arrows

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Types of InvestorTypes of Investor

1 Cautious Investor

2 Emotional Investor

3 Technical Investor

4 Busy Investor

5 Casual Investor

6 Informed Investor7 Passive Investor

8 Active Investor

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