Investment, innovation and the challenges for Europe

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Investing • Dan Solin Attorney and Investment Advisor

ADVANTAGES OF PORTFOLIO APPROACH

• Pooling- a small sum of money from lay investors.

• Diversification- a small sum money when aggregated provides a critical mass for undertaking efficient diversification.

• Convenience - detailed record keeping and ensures accountability

BASIC PORTFOLIO INVESTMENT CONCEPTS

• Unsystematic risks

• Refers to company specific risks, such as the quality of mgmt.

• Systematic risks

• Refers to Market related risks, such as exchange rate changes & interest rate exposures

• Diversification

• Under the Modern Portfolio Theory, unsystematic risks can be eliminated through Diversification

• Investing in many securities is better than investing in one particular stock

• Applicable to securities with Low or Negative Correlation

CLASSES OF INVESTMENT

• Bank savings

• Fixed Deposits

• Annuities

• Debentures

• Corporate Bonds

• Cagamas & Government Bonds

• Equities

• Real Estate

CAPITAL MARKETS

• The place where funds are raised to finance trade

• Types of Capital Markets:

• Primary market

• Secondary market

CLASSIFICATIONS OF INVESTMENT

• Securities or Property

• Direct or Indirect

• Debt, Equity or Derivative Securities

• Low Risk or High Risk

• Short-Term or Long-Term

• Domestic or Foreign

OBJECTIVES AND REWARDS

• Wealth Accumulation

To provide adequate income & capital to meet financial obligations at a future time

• Hedge against inflation

To maintain purchasing power of money

BASIC INVESTMENT CONCEPTS

• Investment Objectives

• What the client wants as an end result of investing

• Efficient Portfolio

• Portfolio that provides the highest return for a stated level of risk or that has the lowest risk for a stated level of return