Investment 1

INVESTMENT
MANAGEMENT
Discussion Topics
1. INTRODUCTION
2. TYPES OF INVESTMENTS
3. SOURCES OF INVESTMENT FUNDING
4. THE INVESTMENT MANAGEMENT
PROCESS
5. PORTFOLIO MANAGEMENT
6. REVIEW & DISCUSSION QUESTIONS
Introduction
What is Investment?
• Investment is the commitment of money or capital
to purchase financial instruments or other assets
in order to gain profitable returns in form of
interest, income, or appreciation of the value of
the instrument
• It is a sacrifice in the present in the expectation of
a future gain.
Investment Management
1. Is the professional management of
various securities and assets to meet
specified investment goals.
Definition: 2. It is the art of administering the

employment of money in financial
instruments in the present, with the
expectation of a positive rate of return in
the future.
Investment Earnings
Overview
Types of Investments
Stocks
Buying a share of ownership in
a corporation and become a
Types of shareholder
Investment Bonds
Buy bonds, loan money to
the government or to a
company
Cash
Equivalents •Savings accounts
• Money market funds or
certificates of deposit (CDs)
Mutual Funds
A mix of investments that
may include stocks, bonds
and cash-equivalents.
Real Estate
•Residential real estate
•Commercial real
estate
Sources of Investment Funding
Internal Sources External Sources
1. Depreciation 1. Trade Credit

2. Retained earnings 2. Bank Borrowing
3. The Partnership 3. Grants
4. Corporate 4. Mortgage and Bonds
Ownership Funds 5. Venture capital
6. Angle Investors
Sources of Investment Funding in
Tanzania
Banking
Most banks in Tanzania have the following lending
services: -
Group & Individual micro loans, SME Loans, Corporate
Loans and Overdrafts.
Non-Banking Institutions
• Any person authorized by law or the Bank to

engage in banking business not involving the
receipt of money on current account subject to
withdrawal by cheque.
These includes Crown Finance & Leasing Limited,

Capital Finance Limited and Blue Financials
Services.
Microfinance Institutions and Savings and

Credit Cooperatives Societies (SACCOS)
Provide financial services to SMEs mainly in the form of

micro credit with an exception of cooperative
based microfinance institutions which are
predominantly savings based.
International Financing Institutions
World Bank, Global Fund (health), EU, etc

The Investment Process
Steps
How do we
Invest?
1. Setting the Investment Objective

2. Formulating the Investment Plan
3. Selecting the Portfolio Strategy
4. Selecting the Assets
5. Measuring and Evaluating Performance
The Investment Process…
PORTFOLIO MANAGEMENT
Definitions:
Diversification is a process of spreading an

investment across assets and thereby
forming a portfolio (Jordan and Miller
2008).
Return Composed of two parts. The Normal, or

expected, return from the stock that
investors predict or expect. And the
uncertain, or risky, part which comes from
unexpected information revealed during the
year.
Performance Evaluation is the assessment of

how well a money manager achieves
balanced between high returns and
accepted risks while investment risk
Total return – Expected management concerns a money manager’s
control over investment risks, usually with
return = Unexpected respect to potential short run losses.
return.
Ctn
11
06/27/24 Investment Management
Diversification and Risk Asset
Allocation
Importance of • Produce a more consistent and stable
Diversification total return
• Eliminates unsystematic risks
Correlation
• Extent to which the return on two assets
How to get most of move together.
it • Two asset moves up and down together
(+ve) correlated
• Two assets moves in opposite directions
(-ve) correlated
Return, Risk, and the Security Market
Line
• Security market line is the line Asset expected
which is used to describe the return E(Ri)
relationship between
systematic risk and expected
return in financial markets.
• Slope of SML = Market Risk
Premium (The reward for
bearing an average amount of
systematic risk) =E(Rm)-Rf
E(Rm)
SML Equation:
E(Ri)=Ri+[E(Rm)-Rf]× ßi Rf
Asset
Beta (ßi)
ßm=1.0
Performance Evaluation and Risk
Management
Methods to deal with problems faced by investor in
risky assets.
 Evaluating risk – adjusted investment performance
 Assessing and managing the risks involved with
specific investment strategies.
Measures used to evaluate investment performance
 Sharpe ratio
 Treynor ratio
 Jensen’s alpha

Investment 1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Investment 1

Uploaded by

Copyright:

Available Formats

INVESTMENT

Definition: 2. It is the art of administering the

1. Depreciation 1. Trade Credit

• Any person authorized by law or the Bank to

These includes Crown Finance & Leasing Limited,

Microfinance Institutions and Savings and

Provide financial services to SMEs mainly in the form of

International Financing Institutions

World Bank, Global Fund (health), EU, etc

1. Setting the Investment Objective

Diversification is a process of spreading an

Return Composed of two parts. The Normal, or

Performance Evaluation is the assessment of

• Eliminates unsystematic risks

You might also like