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Chap 1 Introduction To Invesment

Speculation involves a higher level of risk and more uncertain expected return compared to investment. It refers to buying securities or assets where the outcome is uncertain and no analysis is done beforehand. Gambling depends on chance rather than analysis, while investment purchases assets to generate a return but also carries some risk. Investors differ in their risk preferences, from risk averse to risk neutral to risk taker. The investment process involves meeting prerequisites, setting goals, adopting a plan, evaluating vehicles, selecting investments, constructing a diversified portfolio, and managing it.

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46 views1 page

Chap 1 Introduction To Invesment

Speculation involves a higher level of risk and more uncertain expected return compared to investment. It refers to buying securities or assets where the outcome is uncertain and no analysis is done beforehand. Gambling depends on chance rather than analysis, while investment purchases assets to generate a return but also carries some risk. Investors differ in their risk preferences, from risk averse to risk neutral to risk taker. The investment process involves meeting prerequisites, setting goals, adopting a plan, evaluating vehicles, selecting investments, constructing a diversified portfolio, and managing it.

Uploaded by

SITI NUR LYANA YAHYA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Speculation = an investment that involved a higher level of risk

& a more uncertain expected return

Speculative company = one whose assets involve great risk


but that also has a possibility of great gain
1.1 CONCEPT OF INVESMENT, SPECULATION &
GAMBLING
Gambling = betting on uncertain outcome & no analysis is
made prior to buying the security.

Invesment = purchasing financial instruments or other assets


Gamblers depends on chances & good luck
to get some kind of return with certain risk involved

Economic theories = defined as the per-unit production of


goods, which have not been consumed but will be used for
future production

Education
Finance theories = refers to the purchasing of securities or
other financial assets from the capital market
PERSONAL Emergency reserve

Retirement

Insurance protection

Providing a home

CHAP 1: INTRODUCTION TO INVESMENT Investmen Goals

Portfolio diversification

FINANCIAL Safety of principal

Liquidity portfolios

Protection against inflation

Risk taker 1.2 INVESTMENT GOALS, PROCESS & CONSRAINTS

Risk averse INVESTORS' RISK PREFERENCES 1.3 INVESMENT RISK & RETURN
Risk neutral

Risk = possibility that the actual return may vary from the
expected return 1. Meeting invesment prerequisite 5. Selecting suitable invesment

2. Establishing invesment goals INVESMENT PROCESS 6. Constructing a diversified portfolio


Return = future value amount that we are going to get from an
investment activity
3. Adopting an invesment plan 7. Managing portfolio

4. Evaluating invesment vehicles

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