What Is The Definition of Investment?: Stocks

What is the Definition of Investment?
An investment is an asset that is intended to produce income or capital gains. Investing is the act of using
currently-held money to buy assets in the hopes of appreciation. Investing is a way to build wealth in the
future.
What are Examples of Investments?

There are many investment options, from stocks to jewelry. Essentially, investments can be anything that
an investor believes will increase in value over time or produce income (usually in the form of interest or
rent).
Stocks
Stocks are an equity ownership. When you buy a stock, you own part of a company. This means that you
can profit from a company’s earnings and assets, making stocks an investment.
Bonds
A bond is an agreement between an investor and the company, government, or government agency that
issues the bond. When investors buy a bond, they are loaning money to the issuer in exchange for
interest and the return of principal at maturity. The bond return makes this an investment option.
Real Estate
Real estate refers to land, as well as any physical property or improvements affixed to the land (including
houses). Owning real estate can be considered an investment because it’s possible to build equity over
time as well as earn a return on investment from any rent received.
Mutual Funds
A mutual fund can be thought of as a “basket” of investments. Mutual funds provide investors with access
to a pool of investment options (e.g. bonds, stocks, equities). This creates a diversified portfolio of
investments at a low cost. What’s contained in mutual funds depends on the stated objective of the fund,
which varies in risk.

What is Portfolio and Portfolio Management
(Definition)?
The portfolio is a collection of investment instruments like shares, mutual
funds, bonds, FDs and other cash equivalents, etc. Portfolio management is the
art of selecting the right investment tools in the right proportion to generate
optimum returns with a balance of risk from the investment made.
In other words, a portfolio is a group of assets. The portfolio gives an opportunity
to diversify risk. Diversification of risk does not mean that there will be an
elimination of risk. With every asset, there is an attachment of two types of risk;
diversifiable/unique/unexplained/unsystematic risk and undiversifiable/ market
risk / explained /systematic risk. Even an optimum portfolio cannot eliminate
market risk, but can only reduce or eliminate the diversifiable risk. As soon as risk
reduces, the variability of return reduces.
Best portfolio management practice runs on the principle of minimum risk and
maximum return within a given time frame. A portfolio is built based on investor’s
income, investment budget and risk appetite keeping the expected rate of return
in mind.
Objectives of Portfolio Management

When the portfolio manager builds a portfolio, he should keep the following
objectives in mind based on an individual’s expectation. The choice of one or
more of these depends on the investor’s personal preference.
1. Capital Growth
2. Security of Principal Amount Invested
3. Liquidity
4. Marketability of Securities Invested in
5. Diversification of Risk
6. Consistent Returns
7. Tax Planning
What is Portfolio Management ?
The art of selecting the right investment policy for the individuals in terms of minimum risk and
maximum return is called as portfolio management.
Portfolio management refers to managing an individual’s investments in the form of bonds, shares, cash,
mutual funds etc so that he earns the maximum profits within the stipulated time frame.
Portfolio management refers to managing money of an individual under the expert guidance of portfolio
managers.
In a layman’s language, the art of managing an individual’s investment is called as portfolio management.
Need for Portfolio Management

Portfolio management presents the best investment plan to the individuals as per their income, budget,
age and ability to undertake risks.
Portfolio management minimizes the risks involved in investing and also increases the chance of
making profits.
Portfolio managers understand the client’s financial needs and suggest the best and unique investment
policy for them with minimum risks involved.
Portfolio management enables the portfolio managers to provide customized investment solutions to
clients as per their needs and requirements.
Types of Portfolio Management
Portfolio Management is further of the following types:
 Active Portfolio Management: As the name suggests, in an active portfolio management

service, the portfolio managers are actively involved in buying and selling of securities to ensure
maximum profits to individuals.
 Passive Portfolio Management: In a passive portfolio management, the portfolio manager deals
with a fixed portfolio designed to match the current market scenario.
 Discretionary Portfolio management services: In Discretionary portfolio management
services, an individual authorizes a portfolio manager to take care of his financial needs on his
behalf. The individual issues money to the portfolio manager who in turn takes care of all his
investment needs, paper work, documentation, filing and so on. In discretionary portfolio
management, the portfolio manager has full rights to take decisions on his client’s behalf.
 Non-Discretionary Portfolio management services: In non discretionary portfolio management
services, the portfolio manager can merely advise the client what is good and bad for him but the
client reserves full right to take his own decisions.

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What is the Definition of Investment?

What are Examples of Investments?

time as well as earn a return on investment from any rent received.

which varies in risk.

Objectives of Portfolio Management

Need for Portfolio Management

 Active Portfolio Management: As the name suggests, in an active portfolio management

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