CHAPTER ONE ‘’ THE CONCEPT OF INVESTMENT REITs invest in commercial or residential properties and pay Institutional Investors, also

Institutional Investors, also called as Retail Investor or Small

regular distributions to their investors from the rental income Investor’’
Investing – is a means of gradually increasing one’s wealth. The received from these properties. REITs trade on stock exchanges
fundamental tenet of investing is the expectation of a positive and thus offer their investors the advantage of instant liquidity. - They are also someone who invest in securities and
return in the form of income or statistically significant price assets on their own, usually is smaller quantities.
appreciation. V. ALTERNATIVE INVESTMENTS - Alternative investments is a - They typically buy stocks in round numbers such as 25,
catch-all category that includes hedge funds and private equity. 50, 75 or 100. The stocks they buy are part of their
The main goal of investing - is to create a profit over a Hedge funds are so-called because they can hedge their
predetermined time period or to acquire an additional source of portfolio and do not represent those of any
investments bets by going long and short on stocks and other
income. organization.
investments. - Private equity enables companies to raise capital
without going public. Hedge funds and private equity were - They are also known as ‘’retail investors’’ , an
Investing is the process of buying financial assets with the typically only available to affluent investors deemed ‘’accredited professional investors who buys and sells securities or
potential to increase in value while controlling risk and following a investors’’ who met certain income and net worth requirements. funds that contain a basket of securities
long-term investment strategy However, in recent years, alternative investments have been
introduced in fund formats that bare accessible to retail investors. • Return of capital
What is Investing?
• Return on capital
VI. OPTIONS and OTHER DERIVATIVES - Derivatives are financial
- investing is the process of using money to invest for a • Liquidity
instruments that derive their value from another instrument, such
while in projects or endeavors with the goal of making
as stock or index. Options contracts are popular derivative that I. INVESTMENT MANAGEMENT - Investment management is the
a profit (i.e., profits that surpass the amount of the
gives the buyer the right but not the obligation to buy or sell practice of managing assets to achieve specified investment goals.
initial investment)
security at a fixed price within a specific time period. Derivatives
- EEBNIt is the process of distributing resources, most The assets in questions are frequently liquid or categorized as
usually employ leverage, making them a high-risk, high-reward
commonly capital, or money, with the goal of making a securities but can include other commodities
proposition.
profit or achieving other objectives
VII. COMMODITIES - Commodities include metals, oil, grain and II. INVESTMENT MANAGEMENT SERVICES - Investment
• TYPES OF INVESTMENTS management services include managing portfolios of various
animal products, as well as financial instruments and currencies.
They can either be traded through commodity futures- which are investments such as stocks, bonds, mutual funds, and other
I. STOCKS - A buyer of a company’s stock becomes a fractional
owner of that company. Owners of a company’s stock are known agreements to buy or sell a specific quantity of a commodity at a securities, to generate returns over the long term.
as its shareholder and can participate in its growth and success specified price on a particular future date- or ETFs. Commodities
can be used for hedging risk or for speculative purposes These services often offer a range of options to help clients
through appreciation in the stock price and regular dividends paid
achieve their financial goals, including:
out of the company’s profits.
ESSENTIAL NOTES RELATING TO INVESTING
II. BONDS - Bonds are debt obligations of entities, such as a. ASSET ALLOCATION - Asset allocation divides an investment
• Investing involves deploying capital (money) toward projects or portfolio among various asset categories, such as stocks, bonds,
government, municipalities, and corporations. Buying a bond
activities that are expected to generate a positive return over and cash
implies that you hold a share of an entity’s debt and are entitled
time.
to receive periodic interest payments and the return of the
bond’s face value when it matures. b. FINANCIAL STATEMENT ANALYSIS - Financial statement
• The type of return generated depends on the type of project or
analysis is an essential process that aids decision making. External
asset; real estate can produce both rents and capital gains; many
III. FUNDS - Funds are pooled instruments managed by stakeholders gain insights into an organization’s overall health
stocks pay quarterly dividends; bonds tend to pay regular interest.
investment managers that enable investors to invest in stocks, and value by examining a company’s financial statements.
bonds, preferred shares, commodities, etc. • In investing, risk and return are two sides of the same coin, low
risk generally means low expected returns, while higher returns c. STOCK SELECTION - A stock selection strategy could be ideal for
Two types of funds investors looking to maximize gains. One can leverage those
are usually accompanied by higher risk.
perceived advantages without hedging or diversifying into
Mutual funds do not trade on an exchange and like, stocks, are
• Investors can take the do-it-yourself approach or employ the different industries by purchasing stocks and placing them in a
valued constantly throughout the trading day.
services of a professional money manager. portfolio based on their strengths.
ETFs - trade on stock exchanges and, like stocks, are valued
• Whether buying a security qualifies as investing or speculation d. INVESTMENT MONITORING - Tracking investments and
constantly throughout the trading day.
depends on three factors- the amount of risk taken, the holding measuring the portfolio’s performance compared to measurable
IV. INVESTMENT TRUSTS period, and the source of returns. objectives is essential.
- Trust are another type of pooled investment. Real Estate
CHAPTER TWO ‘’INTRODUCTION TO INVESTMENT
Investment Trusts (REIT’s) are one of the most popular in this e. Portfolio Strategy and Implementation- Must be able to select,
category. MANAGEMENT’’
prioritize, and overseas programs and projects that adhere to the
What is an Individual Investor? - ‘’An individual who purchases organization’s strategic objectives and delivery capacity
small amounts of securities for themselves, as opposed to an
 IV. OPERATING AN INVESTMENT MANAGEMENT COMPANY 11 . Purchase or Lease the appropriate Investment Company
Starting your investment firm can be quite profitable. You can Equipment
succeed with proper preparation, execution, and hard effort. You will need a computer, a phone, an internet connection, and
promotional materials to establish your own investment
1. SELECT A NAME FOR YOUR INVESTMENT COMPANY company.
- The first step in establishing your investment firm is to select a
unique business name. 12. Create Marketing Materials for your Investment Company
- You will need marketing materials to acquire and retain clients
2. Create a Business Plan for your Investment Company for your investment firm.
- Developing your plan guarantees you thoroughly understand
your market and strategy. The strategy also includes a road map 13. Purchase and Install the software the required to
for you to follow and, if necessary, submit to funding sources to run your investment firm
raise funds for your firm. You will need a financial analysis program to make
informed selections regarding which stock markets to
3. Choose your Investment Company’s Legal Structure invest in.
- Select a business structure for your investment firm and register
it, as well as your business name, with the Secretary of State in 14. Open for Business
each state where you do business. - You are now prepared to start your investment firm.
III. ADVANTAGES AND DISADVANTAGES OF INVESTMENT
MANAGEMENT 4. Obtain Start up Capital for your Investment Company Chapter Three: Portfolio Management
ADVANTAGES DISADVANTAGES - Personal savings, family and friends, credit card financing, bank
loans, crowdsourcing and angel investors are the primary sources Portfolio Mnagement – the art and science of selecting
BOOST INCOME COSTLY of finance for an investment firm to consider. and overseeing a group of investments that meet the
Investment managers can Investment management services
long term financial objectives and risk tolerance of a
help to increase the income can be expensive in the form of high 5. Choose a location for your company client, a company,or an institution
from an investment portfolio expense ratios and sales charges. - When looking for a place for your investment firm, finding a Active Portfolio management - requires strategically
by identifying investments location that will benefit your organization is critical such as a city
with higher returns and buying and selling stocks and other assets in an effort
with a robust economy receptive to new enterprises. to beat the performance of the broader market.
implementing strategies to
maximize income. Passive portfolio management- seeks to match the
6. Register your Investment Company with the Internal Revenue
Minimizes Tax Liabilities Management Abuses returns of the market by mimicking the make up of an
Service (IRS)
Investment managers can In some cases, investment index or indexes.
-You must register your company with the IRS, which result in the
help minimize tax liabilities by managers may abuse their position MAIN PORTFOLIO MANAGEMENT TYPES
IRS awarding you an Employer Identification Number (EIN)
reducing taxes on investment and engage in unethical or illegal
income and short term or practices, such as insider trading or i. PASSIVE MANAGEMENT - Is the long-term set-it-and-forget-it
7. Establish a Business Bank Account
long-capital gains. misinterpreting investment risks. approach. Purchasing one or more exchange-traded fund (ETF)
- Opening a bank account in the name of your investing
index funds could be part of it. This is sometimes known as index
organization is critical.
investment or indexing. Modern portfolio theory (MPT) can assist
Reduces Risks Volatile Investments those who construct indexed portfolios in optimizing the mix. ii.
8. Apply for a Business Credit Card
Investment managers can Investments in financial markets are
- To help you separate personal and company costs, you could ACTIVE MANAGEMENT - Involves actively purchasing and
help to manage risk in subject to volatility and can lose
obtain a corporate credit card for investing firm. disposing of individual stocks and other assets in an effort to
an investment portfolio by value. Investment managers may be
outperform an index.
diversifying investments and unable to prevent or mitigate losses
9. Obtain the necessary Business Licenses Permits Discretionary Management - This type of portfolio management
implementing strategies to in all cases.
reduce volatility. - To establish an investing firm, you must first register with the allows professionals to make decisions about a client's holdings
Securities and Exchange Commission (SEC) and obtain the without the need for ongoing authorization from the investor.
Outperforms the Market necessary state securities license.
Investment managers can Non-Discretionary Management - This approach requires the
help to outperform the 10. Purchase Commercial Insurance for your Investment investor to be actively involved in every decision, including what
market by actively managing Company investments are bought and sold
an investment portfolio and -The sort of insurance required to run your investment firm is
making informed investment determined by the type of business you run.
decisions.
 long-term outlook, formulate expectations for risk and • TYPES OF RISK
return of various asset classes.
• Asset Allocation Strategy - There are two strategies to i. Market Risk – It is also called systematic risk and arise due to
consider here, strategic and tactical. A strategic asset various market related factors like economic and political
allocation strategy is a long-term strategy that problems, interest rate and currency fluctuations, etc
necessitates regular rebalancing to ensure you do not ii. Specific Risks – They are related mostly to company itself. They
deviate from your goals may be controlled through diversification a monitoring.
iii. Credit Risk – This is related to credit worthiness of the
2. Execution company or business. If the financial conditions of the business is
good, it will be able to meet its current and future obligations and
• Portfolio Selection - This involves an investor deciding repay its debt on time. This will lead to good credit rating. Credit
which assets to include in their portfolio. It requires risk is the result of deteriorating financial health of the company.
balancing risk and return expectations while iv. Liquidity Risk- This is the result of the business not being able
accounting for external factors, such as inflation to earn good revenue to meet its financial obligations and
and taxes, to ensure a favorable outcome. maintain high working capital.
• Portfolio Implementation - Poorly timed and managed v. Interest Risk Rate – The fluctuation in the interest rates in an
KEY ELEMENTS OF PORTFOLIO MANAGEMENT I. ASSET portfolio executions can result in significant economy can affect the business’s borrowing capacity. vi.
I.ALLOCATION - refers to the placement of assets within various transaction costs. When executing a portfolio, it is Inflation- The inflation leads to erosion of value of the cash flow in
accounts, such as tax-advantaged or taxable accounts. is based on essential to consider both explicit and implicit costs. future.
the understanding that different types of assets do not move in
TYPES OF RETURN
concert, and some are more volatile than others. A mix of assets 3.Feedback
provides balance and protects against risk i. Capital gains- The value of any wise investment will increase
• Monitoring and Rebalancing - A portfolio over time. Therefore, if the assets are sold later on, their worth
II. DIVERSIFICATION - Involves spreading the risk and reward of manager should regularly monitor and evaluate will be higher than their acquisition price, resulting in a capital
individual securities within assets class, or between asset classes. risk exposures within the portfolio to rebalance it gain.
according to the strategic asset allocation. ii. Dividends- they are a steady source of income for investors
III. REBALANCING - It is used to return a portfolio to its original
• Performance Evaluation - Evaluating a portfolio who invest in shares of companies giving regular dividends which
target allocation at regular intervals, usually annually. This is done
using absolute and relative returns gives a are a part of the profits set aside for investors.
to reinstate the original asset mix when the movements of the
complete picture of its strengths and iii. Interest- Borrowers like individuals or corporates borrow
markets force it out of kilter.
weaknesses. money for meeting expenses or capital requirements. The lenders
IV. TAX-EFFICIENCY - A potentially material aspects of portfolio give the funds to get interest on the principal amount which is a
Chapter FOUR: Risk and Return of Investment
management relates to how your portfolio is shaped to minimize return on investment for the lenders.
taxes in the long term. This pertains to how different retirement Financial Risk and Return - in investing are perhaps the most iv. Rental Income- Any property rented out can earn rent on a
accounts are used, how long securities are held on for, and which crucial parameters considered by investors while choosing an regular basis, which is also a return in the real estate property.
securities are held. investment option v. Return from currency trading- Profits earned from trading in
exchange rates by using the difference is exchange rate of
Risk - can be defined as the uncertainty related to the investment, different currency is also a form of return for those who do
market, or company. Investors want profits, and the risks can currency trading.
PROCESS OF PORFOLIO MANAGEMENT
potentially reduce the profits, sometimes even making a loss for
1. Planning them.

• Identification of Objectives and Constraints - Identify Return on investment, or ROI. - It can be defined as the monetary
the investment objectives, which refer to any desired profits from making a particular investment. Individuals should
outcomes for the client regarding return and risk. ideally favor investments that yield larger returns, such as equities
of companies like Google, Amazon, etc
• Investment Policy Statement - Draft an
effective investment policy statement that provides
valuable direction for investors' resource allocation
decisions. Risk and Return in Financial Management
• Capital Market Expectations - To help investors assess
the potential investment returns and determine the High risk – High returns

Low risk – Low returns