ASSIGNMENT NO# 1

Submitted to: Mam Sadia

Submitted by: Zaheer Abbas (12130920-070)
Department:

FMAS

Section:

Semester:
Date:

8th
19 April 2016

UNIVERSTY OF GUJRAT

What do you understand by investment and how investment is

different from speculation?
Investment is the current commitment of dollars for a period of time in order to
derive future payments that will compensate the investor. The difference
between speculation and investment.

Investment
Role of expectations.
Certain income
Reasons of purchases
Time period. Have certain time
period like long term period.
Investor has authenticated
information about it
Purpose of safety in return

Speculation
Something will be happen in
future. If any change occur in
market which increase the share
price.
Investment only bases on tips.
Bases on rumrs.just get the
benefit. For short term
They used different method for
investment like
In bearish the sellers increase in
market so price decrease of
share
In bulls the suppliers less so the
price of share increase then they
sale in the market.
Kill: price decrease
Pill :price increase

What does meant by security analysis and portfolio

management?
Security analysis is a procees which help to analysis the value
of assets.as well as also check the effect of market
fluctuations on the value of assets.security analysis also
measure the value of asstes in term of
economic,financial,qualitative etc.
Portfolio management:
it is like a art& science which capable a invester where is
opportunity to invest.

Explain the investment process and who it varies with the age
of investors?
The process of managing an investment. There are four steps that are used to
construct a portfolio management that are policy statement .investment strategy,
construct the portfolio and review of the portfolio.
1) Policy statement:
2) Investment strategy
3) Construct the portfolio
4) Review the portfolio
1) Policy statement:
In the policy statement provides the direction or guidelines to the investors it
also describes the basic objectives and constraints of investment.it is a written
document. There are also involved different conditions in policy statement.
Objective:
The basic purpose of the policy statement what is the risk and return on the
investment? How much tolerance to bear? Because there should be the risk is
moderate in starting.
Capital preservation (short run)
25 years old prefer.The inverters want to minimize the risk of loss. They only
need return in safty.they think for short term.
Capital appreciation: (long term)
They think for long run because they need high return.so they want to growth
with capital.
Current income: (short run)
25 years old prefer when the current income is the return objective of the
investees then the investors willing to construct the portfolio that generate the
income instead of capital gain.
Total return: (long run)
65 years old prefer. It is similar to the capital appreciation because these type of
investors also want to construct the portfolio to which grow over time and meet
the future needs.
Constraints:

Liquidity needs:
The short term investors want to take minimum risk.so they prefer to invest for
short term that are converted very quickly. That is a hurdle to construct the
portfolio
Time horizons:
Time horizon also effect for the construction of portfolio. Because there are
different needs of the individuals on different occasion on the bases of age
because the old age people want to return on the age of 65 for living expenses
and middle age people want the amount on major occasion.so people differed in
needs.
Taxation:
You should invest where marginal and average tax is less.
Marginal tax; is the part of each additional dollar in income that is paid tax
Average tax: a persons total tax payment divided by his total income
2) Development investment strategy:
In this stage we check the basic charactritics.our return should be secureand
safe.check the inflation rate,politicle factor and economic factor etc.if long term
invest then the risk and return will be more.if short run invest then the risk and
return will be less.analysis the company financial statement through time series
and comparison .
3) Construct the portfolio:
The initial investment should be in passive because the investment in early
stages.and response is less then slowly move and do a little bit change in
investment.
4) Review of portfolio:
In this step we set the target, if the target have not achieved then update the
system for better result. Monitor and update the investors needs.

Asset Allocation:
It is the process through which the investor distribute their investment in
different countries according to the assets class. And uses different assets
classes for investment in different countries. The asset class means the

securities that have similar characteristics risk and return relationship. The
investors have used different assets classes for investment according to its own
interest and feelings. The investor also check the risk and return on their
investment. The investor used different assets class like corporate bond, etc.
Because there will be high return and as well as high risk on long term
investment. If the investors see the high risk on long term instrument then the
investor prefer to invest on short run. We also know that there will be no proper
guarantee for the success of our investment. Only a reasonable way for
checking the good return on investment is that used disciplined approach.it is
not a lonely choice for asset allocation because it is the component of portfolio
management process. For assets allocation we developed a guideline plan for all
decisions that we will do in future. Because much of our investment depends on
the guideline policy.it is more important for investors in all kinds of
investments. Because it provides a guideline or direction to the investors.