Introduction to Investment Management

Question 1

• assets acquired to realize income or earn profits
• purchase of goods that are not consumed today but are used
  in the future to create wealth
• monetary asset purchased with the idea that the asset will
  provide income in the future, or appreciate and be sold at a
  higher price

Answer 1

Investment

Question 2

• process of defining investment to optimum results considering the risks involved and evaluating its performance
  periodically
• professional management of various securities and assets to meet certain financial goals

Answer 2

Investment Management

Question 3

collection of financial assets that may be held by individual
investors or managed by financial professionals, hedge funds,
banks or other financial institutions.

Answer 3

Investment Portfolio

Question 4

• financial instrument that represents ownership position, a
  creditor relationship with governmental body or corporation,
  or rights to ownership as represented by an option
• negotiable financial instrument that represents some type of
  financial value

Answer 4

Security

Question 5

Forms of Investment

Answer 5

1. Savings account
2. Time deposit
3. Special savings deposit
4. Trust investment
5. Treasury bills
6. Commercial paper
7. Bonds
8. Stocks
9. Mutual funds
10. Derivatives
11. Real estate/Real properties
12. Precious stones and metals
13. Works of arts and
    collectibles

Question 6

• venues for buying and selling financial instruments
• can be money markets or capital markets

Answer 6

Financial Markets

Question 7

Factors in Allocating Investable funds

Answer 7

1. Investor’s cash needs
2. Risk preference or tolerance
3. Financial limitations
4. Time horizon
5. Laddered timing
6. Market timing

Question 8

1. Failure to make financial plan for the future
2. Miscalculating risk tolerance
3. Failing to keep sufficient amount of funds for emergency
   purposes
4. Jumping on a bandwagon
5. Inability to have leverage
6. Over-diversification
7. Erroneous timing of the market
8. Failure to keep a long-term perspective
9. Inability to cut losses

Answer 8

Common Mistakes in Investing

Question 9

• extreme spreading to many items of investment

Answer 9

Over-diversification

Question 10

Disadvantages of Over-diversification

Answer 10

1. Inability of investor to keep track of developments in each
   item of investment.
2. Increased transaction cost.
3. Minimized earnings from more profitable items of investment.