Investment Management 

Use of funds in assets with the aim of obtaining income or capital appreciation.

Financial & Economic meaning


Financial: Commitment of person’s fund to derive future income in the form of interest, dividend, pension benefit or appreciation in the value of their capital. e.g.:- purchase of shares, debentures, post office savings certificates etc…..

Economic: Net additions to the economy’s capital stock – goods & services that are used in the production of other goods and services. e.g.:- new constructions, plant & machinery, inventories etc…..

Real Asset: Assets which are tangible or physical in nature

Real Estate: Residential land, building, apartments, farm land etc.

Other tangible Assets: Precious metals like gold, silver, and platinum. Precious stones like diamonds, colored stones. Antiques.

Financial Assets: An intangible asset that derives value because of a contractual claim. e.g.:- Stock, bonds, bank deposits etc.

Characteristics Investment

·         Return

·         Risk

·         Liquidity

·         Safety

·         Contribution to capital formation.

Objectives …

·         Maximization of Return

·         Minimization of Risk

·         Tax minimization

·         Liquidity


·         Buying & selling of securities within a very short period of time (less than one year)

·         Speculator

·        Need capital gain only e.g.:- a person who buy a security at 9’o clock & sell at 9:30 for the quick gain (may be loss)

Investment Vs Speculation




Risk assumed

low to High

always high

objective Regular return + capital

Regular return + capital gain

capital gain

Time period

long term

Always short term

Funds Use borrowed fund to supplement his own fund

His own fund

Use borrowed fund to supplement his own fund

Nature of return Quick & short term

Consistent & long term

Quick & short term



·         Taking high risk not only for high return but also for thrill & excitement.

·         Unscientific & unplanned

·         Based on tips & rumors e.g.:- horse race, lotteries, card games etc.

·         Investment Vs Gambling





Carefully planned & scientific

Unplanned &unscientific

Risk & return

Risk match with return

Taking high risk for high return


For regular income & capital gain

For thrill & excitement


Long term

Very short term


Detailed analysis

Based on tips & rumors


Types of Investor

·         Individual Investor

·         Industrial Investor


Individual Investor

·         Large in number

·         Investible resources are smaller

·        Lacks extensive evaluation & analysis

Industrial Investor

·         Organization with surplus fund who engage in investment activities.

·         Fewer in numbers

·         Investible resources are much larger.

·       Professional approach

Framing investment Policy

·         Investible funds

·       Objectives

·       Knowledge

Tax sheltered savings scheme

        Public provident fund scheme

        National savings scheme

      National savings certificate


The market where new securities are issued Market in which shares, debentures and other securities are sold for the first time for collecting long-term capital. NEW ISSUE MARKET Modernize the plant, machinery and buildings, for extending business, and for setting up new business unit etc……….

Secondary market

Market for already issued securities includes equity shares, preference shares etc... Also called stock exchange.

Functions of stock exchanges

        Ready market

        Liquidity & marketability of securities

        Fair price determination

        Sources of long term fund

        Reflection of business cycle

        Promotion of investment

        Flow of capital to profitable venture