Investments DefinedInvestments is the study of the process of
committing funds to one or more assets
Emphasis on holding financial assets and marketable
securitiesConcepts also apply to real assetsForeign financial
assets should not be ignored
Investment ObjectivesPrimary ObjectivesSafety of
principalIncomeGrowth of capitalSecondary ObjectivesLiquidityTax
minimization
Investment ConstraintsPossible constraints for investors
include:
LegalMoral / EthicalEmotional including investment knowledge and
risk toleranceBasic minimum income to be provided by the portfolio
Realism an understanding that some objectives are unrealistic
(e.g., high returns with low risk)Other (e.g., illness, pending
divorce, etc.)
Primary and Secondary ObjectivesObjectives and constraints must
be related to the three primary investment objectives of safety,
income, and growth, and to the secondary objectives of liquidity
and tax minimization.
The importance of safety relates to: risk, market timing,
inflation, return, and emotionThe importance of income relates to:
taxation, return, risk, inflation, and basic minimum incomeThe
importance of growth relates to: taxation, risk, return, market
timing, and emotional considerations
Why Study Investments?Most individuals make investment decisions
sometime
Individuals need sound framework for managing and increasing
wealthEssential part of a career in the field
