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Security Analysis & Portfolio Management: Dr. Gangineni Dhananjhay

This document provides an overview of security analysis and portfolio management. It discusses key concepts such as investment objectives, the features and process of investments, and different investment alternatives and avenues. Specifically, it defines investment, discusses common investment objectives like maximizing returns and minimizing risk, and outlines the key features of investments including return, risk, safety, and liquidity. It also describes the process of developing an investment policy, analyzing investments, valuing securities, and constructing a portfolio. Finally, it distinguishes between investment, speculation, and gambling.

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DrDhananjhay Gangineni
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64 views

Security Analysis & Portfolio Management: Dr. Gangineni Dhananjhay

This document provides an overview of security analysis and portfolio management. It discusses key concepts such as investment objectives, the features and process of investments, and different investment alternatives and avenues. Specifically, it defines investment, discusses common investment objectives like maximizing returns and minimizing risk, and outlines the key features of investments including return, risk, safety, and liquidity. It also describes the process of developing an investment policy, analyzing investments, valuing securities, and constructing a portfolio. Finally, it distinguishes between investment, speculation, and gambling.

Uploaded by

DrDhananjhay Gangineni
Copyright
© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
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SECURITY ANALYSIS

&
PORTFOLIO MANAGEMENT

Dr. GANGINENI DHANANJHAY


PROFESSOR & DEAN
DEPARTMENT OF MBA
NARAYANA ENGINEERING COLLEGE NELLORE
Module -1: Introduction To Investments

Investment
Investment is an asset purchased with the idea that the asset
will provide income in the future or will later be sold at
a higher price for a profit.
Common forms of investment include financial markets
(e.g. stocks and bonds), credit (e.g. loans or bonds),
assets (e.g. commodities or artwork), and real estate.
Objectives of Investment
Maximize returns
Minimize risk
Tax minimization:
Marketability/liquidity
Features of Investments
Return:
Investments are made with the primary objective of deriving a return.
Return may be received in the form of yield plus capital appreciation.
The difference between the sale price & the purchase price is capital
appreciation. The dividend or interest received from the investment is
the yield.
Return from an investment depends upon the nature of investment, the
maturity period & a host of other factors.
Risk
Risk may relate to loss of capital, delay in repayment of capital,
nonpayment of interest, or variability of returns.
The risk of an investment depends on the following factors given
below.
The longer the maturity period, the longer is the risk.
The lower the credit worthiness of the borrower, the higher is the risk.
Features of Investments
Safety
the certainty of return of capital without loss of money  or time.
investor expects to get back his capital on maturity without
loss & without delay.
Liquidity
An investment, which is easily saleable, or marketable without
loss of money & without loss of time is said to possess
liquidity.
Some investments like company deposits, bank deposits, P.O.
deposits, NSC, NSS etc. are not marketable.
Equity shares of companies listed on stock exchanges are
easily marketable through the stock exchanges.
PROCESS OF INVESTMENTS
Investment Policy
determines and involves personal financial affairs and
objectives before making investments. It may also be called
preparation of the investment policy.
identifying investment assets and considering the various
features of investments.
Investment Analysis
To analyze the securities available for investment. He must
make a comparative analysis of the type of industry, kind of
security and fixed vs. variable securities.
future behavior or prices and stocks, the expected returns and
associated risk.
Valuation of Securities
Investment value, in general, is taken to be the present worth
to the owners of future benefits from investments.
. Comparison of the value with the current market price of
the asset allows a determination of the relative attractiveness
of the asset. Each asset must be valued on its individual
merit. Finally, the portfolio should be constructed.
Portfolio Construction
portfolio construction requires knowledge of the different
aspects of securities. These are briefly recapitulated here,
consisting of safety and growth of principal, liquidity of
assets after taking into account the stage involving
investment timing, selection of investment, and allocation of
savings to different investments and feedback of portfolio.
Investments Alternatives & Avenues

Equity Shares
Debentures Or Bonds
Money Market Instruments
Mutual Funds
Life Insurance and General Insurance
Real Estate
Precious Objects
Derivatives
Non-Marketable Securities
Investment, Speculation and Gambling
Investment
Investment is a monetary asset purchased with the idea that the asset will
provide income in the future or will later be sold at a higher price for a
profit.
Speculation
 Speculation involves calculating risk and conducting research before entering a
financial transaction. A speculator buys or sells assets in hopes of having a bigger
potential gain than the amount he risks.
 For example, an investor may speculate that a market index will increase due to strong
economic numbers by buying one contract in one market futures contract. If his
analysis is correct, he may be able to sell the futures contract for more than he paid,
within a short- to medium-term period. However, if he is wrong, he can lose more than
his expected risk.
Gambling
 Converse to speculation, gambling involves a game of chance. Generally, the odds are
stacked against gamblers. When gambling, the probability of losing an investment is
usually higher than the probability of winning more than the investment.
Comparison Chart
BASIS FOR COMPARISON INVESTMENT SPECULATION

Meaning The purchase of an asset with the hope of Speculation is an act of conducting a
getting returns is called investment. risky financial transaction, in the
hope of substantial profit.

Basis for decision Fundamental factors, i.e. performance of Hearsay, technical charts and market
the company. psychology.

Time horizon Longer term Short term

Risk involved Moderate risk High risk

Intent to profit Changes in value Changes in prices

Expected rate of return Modest rate of return High rate of return

Funds An investor uses his own funds. A speculator uses borrowed funds.

Income Stable Uncertain and Erratic

Behavior of participants Conservative and Cautious Daring and Careless

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