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CHAP 1: INTRODUCTION TO INVESMENT - Coggle Diagram
CHAP 1: INTRODUCTION TO INVESMENT
1.1 CONCEPT OF INVESMENT, SPECULATION & GAMBLING
Invesment = purchasing financial instruments or other assets 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
Finance theories = refers to the purchasing of securities or other financial assets from the capital market
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
Gambling = betting on uncertain outcome & no analysis is made prior to buying the security.
Gamblers depends on chances & good luck
1.2 INVESTMENT GOALS, PROCESS & CONSRAINTS
INVESMENT PROCESS
Meeting invesment prerequisite
Establishing invesment goals
Adopting an invesment plan
Evaluating invesment vehicles
Selecting suitable invesment
Constructing a diversified portfolio
Managing portfolio
Investmen Goals
PERSONAL
Insurance protection
Providing a home
Emergency reserve
Education
Retirement
FINANCIAL
Safety of principal
Liquidity portfolios
Protection against inflation
Portfolio diversification
1.3 INVESMENT RISK & RETURN
Risk = possibility that the actual return may vary from the expected return
Return = future value amount that we are going to get from an investment activity
INVESTORS' RISK PREFERENCES
Risk taker
Risk averse
Risk neutral