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    Decision Process

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    Furqan Ahmed
    The document discusses the decision process investors use when constructing an investment portfolio. It describes security analysis as the first part of the process, where investors value and analyze individual securities. The steps of security analysis include considering the prospects of the overall economy, determining favored industries based on economic conditions, and choosing particular companies within those industries. The document outlines that portfolio management is the second part of the decision process, where investors establish the broad features of their portfolio by deciding asset allocations across stocks, bonds, and other securities.

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    Decision Process

    Uploaded by

    Furqan Ahmed
    9 views8 pages
    The document discusses the decision process investors use when constructing an investment portfolio. It describes security analysis as the first part of the process, where investors value and analyze individual securities. The steps of security analysis include considering the prospects of the overall economy, determining favored industries based on economic conditions, and choosing particular companies within those industries. The document outlines that portfolio management is the second part of the decision process, where investors establish the broad features of their portfolio by deciding asset allocations across stocks, bonds, and other securities.

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    The document discusses the decision process investors use when constructing an investment portfolio. It describes security analysis as the first part of the process, where investors value and analyze individual securities. The steps of security analysis include considering the prospects of the overall economy, determining favored industries based on economic conditions, and choosing particular companies within those industries. The document outlines that portfolio management is the second part of the decision process, where investors establish the broad features of their portfolio by deciding asset allocations across stocks, bonds, and other securities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    9 views8 pages

    Decision Process

    Uploaded by

    Furqan Ahmed
    The document discusses the decision process investors use when constructing an investment portfolio. It describes security analysis as the first part of the process, where investors value and analyze individual securities. The steps of security analysis include considering the prospects of the overall economy, determining favored industries based on economic conditions, and choosing particular companies within those industries. The document outlines that portfolio management is the second part of the decision process, where investors establish the broad features of their portfolio by deciding asset allocations across stocks, bonds, and other securities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    Decision Process

    Instructor : Saira Ishfaq


    Recap
     In previous lecture we have discussed
     Investment decision basis
     Return
     Risk
     Types of investors on basis of risk
     Trade off between risk and return
    DECISION PROCESS
     An investor’s portfolio is simply his collection of investment assets. Wealth is evaluated and managed
    within the context of a portfolio, which consists of the assets holding of an investor. Once the portfolio is
    established, it is updated by selling existing securities and using the proceeds to buy new securities, by
    investing additional funds to increase the overall size of the portfolio, or by selling securities to decrease
    the size of the portfolio.

     Investors can choose from a wide range of securities in their attempt to maximize the expected returns
    from these opportunities. Investors make two types of decisions in constructing their portfolio: security
    analysis and portfolio management.
    Security analysis
     The first part of the investment decision process involves the valuation and
    analysis of individual securities, which is referred to as security analysis. An
    investor who has all his money in saving account would first decide what
    proportion of the overall portfolio ought to be moved into stocks, bonds, and so
    on. In this way, the broad features of the portfolio are established. First of all it
    is necessary to understand the characteristics of the various securities and
    factors that affect them. Second, a valuation model is applied to these securities
    to estimate their price, or value. Value is a function of the expected return on a
    security and the risk attached.
    Steps in Security Analysis
     Steps in security analysis:
     1) The analyst considers prospects for the economy, given the state of the
    business cycle
     2) The analyst determines which industries are likely to fare well in the
    forecasted economic conditions
     3) The analyst chooses particular companies within the favored industries
    Prospects of economy
     Boom activities
     Bullish trends, bearish trends
     Business cycle ( Recession, growth)
    Favored Industry

     Industries performing good in an economy.


    Particular Company
     After identifying prospects & favored industry, select a particular company within an industry.

     Selection of company is made on its past performance, returns, forecasts, Annual reports
    . Press releases etc

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