investment – know how
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Basics & Starting pointTRANSCRIPT
Investment – Know How
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By,Rakesh Murthy K G, CFA
What is Investment ?Is it Savings ?
Or something more ??
What do you think ???
InvestmentIt is the process of,
‘Sacrificing something now for the prospect of gaining something later’
3 DimensionsTimeToday’s SacrificeProspective gains
Few Transactions 1. In order to settle down, a young couple buys a house for Rs. 30
lacs in Bangalore2. A wealthy farmer pays Rs. 1 lac for a piece of land in his village3. A cricket fan bets Rs. 1000 on the outcome of a test match in
New Zealand4. A college professor buys, in anticipation of good returns, 10
shares of RIL for Rs. 95005. A clerk deposits Rs. 5000 in postal savings account6. Based on a rumor that the ongoing IPO of ‘DAMAKA Software
ltd.’ will fetch astounding gains, Suntachari applies for 600 shares
InvestmentVs
Speculation
What is Speculation ?There’s an element of Speculation involved in
all Investment DecisionSpeculations are :
Not so thought out decisions – Gut FeelingsOut of Greed & FearNot Asset but ProfitRisk Taker
Are all Investments Speculative?
Well Investments can be Separated on the following grounds
Planning HorizonRisk DispositionReturn ExpectationBasics of DecisionsLeverage
Positioning• Striking the Right Chord
Your Intention makes the difference
In the above example – Professor Investing in RIL is for a long term. On the Contrary, if he’s investing for the Day?
Life Gyan Everyone have everything, your Thinking makes the difference
Objectives
Financial Goals are Life Goals
Goals in LifeFinancial Goals are Life goals
Based on :Time Importance
Near Term High Priority Buying Car Buying House
Long term High Priority Retirement Planning Children Education
Low Priority Vacation Charity
Money Making Goals Increase Wealth Buy Businesses
Investment Constraints
Need to ConsiderLiquidityAgeTime HorizonNeed for Regular IncomeRisk ToleranceTax Liability
ApproachesWhat makes you Buy ?!?!?!
Fundamental ApproachInvest at their Intrinsic Value
Sooner or later the Market price falls in line with Intrinsic Value
Buying undervalued items
Psychological ApproachGreed & Fear
Guided by Emotions
Emotions out weigh the Intrinsic Value
Technical Analysis
Academic ApproachTheories of all the Academicians
They correspond to Fundamental Approach
Market Price = Intrinsic Value
Eclectic ApproachDiverse Approach
Combination of all the above
It’s a mix - Fundamental shows what & Technical's states when
Investment ClassificationThoda Financial Markets,
Thoda Others
Investment
Financial Investme
nt
Fixed Income
Variable IncomeReal
Investment
Fixed Income Instruments
Gilt Postal DepositsBank DepositsCorporate DebenturesCorporate FD’sCD’s & CP’sPPF
Gilt Securities
Debt Securities issued by Govt. & semi Govt.
They are the Public borrowings
Largest Public Debt Country????
Treasury Bills
Issued by RBIMATURITY
91 Days364 Days
Sold at auctionEnd of Maturity, Receives Face Value
Govt. Dated Securities
Maturity Period over 1 yrInterest is payable Semi AnnuallySecurity can be Stock Certificate or
Promissory Note All the FI’s need to invest certain portion
Assignment
Find the list of Bank FD’s & choose the best one to be invested.
Mistakes & SuccessHum Honge kaamiyaab !!!
Common ErrorsInadequate comprehension of Risk &
ReturnVaguely Formulated Investment PolicyPast ExperiencesHurry burry, Sue's the curryLove for cheap stocksOver / Under Diversification Wrong Attitudes towards LossesTendency to Time the Market
Successful InvestingContrary Thinking
Out of the BoxPatienceComposureFlexibilityDecisivenessInvest never SpeculateAvoid Derivatives
BuyBusinesses,
NotStocks
ANY QUESTIONS
Thank You
“Be the change you want to see in this world”
- Mahathma Gandhi