5 Steps of Investment Management Process

Filed under: Investment Management

Before investing, investment management should be done. Investment Management is a five step process. Following are the 5 steps of investment management:1- Setting the Investment Objectives:The first and the basic step for investment is that the investor should set his investment objectives. These investment objectives vary from person to person. For example for an individual the objective may be to optimize the rate of return. 2- Establishing Investment Policy:Establishing investment policy refers to the allocation of asset amongst the major allocated assets in the capital market. The range of allocated asset is from equities, debt, fixed income securities, real estate, foreign securities to currencies. Restraint of environment and that of investor should be kept in mind while establishing the investment policy. 3- Selecting the Portfolio Strategy:The portfolio strategy selected should be in accordance and in conformity with the investment objectives and investment policies. If these are not in accordance with each other then the whole investment management process will collapse. 4- Selecting the Assets:The assets to be placed in the portfolio have to be selected by the investor. This is the point where real creation of portfolio will take place after the

selection of assets in which to invest by the manager or investor. That asset will be selected which will give best return in available resources and which involves lowest risk. The assets can be shares, stocks, art objects, securities, gold, property etc. 5- Measuring and Evaluating Performance:In this step the performance of the portfolio will be measured in comparison to the realistic benchmark or the standard set by the investor. Risk and return will be evaluated by the manager. Measuring and evaluating the portfolio will give the feedback to the investor and will in turn help the investor to improve the quality as well as the performance of the portfolio of investment.

OBJECTIVES OF INVESMENT
Depending on the life stage and risk appetite of the investor, there are three main objectives of investment: safety, growth and income.
Safety
While no investment option is completely safe, there are products that are preferred by investors who are risk averse. Some individuals invest with an objective of keeping their money safe, irrespective of the rate of return they receive on their capital. Such near-safe products include fixed deposits, savings accounts, government bonds, etc.

Growth

While safety is an important objective for many investors, a majority of them invest to receive capital gains, which means that they want the invested amount to grow.There are several options in the market that offer this benefit. These include stocks, mutual funds, gold, property, commodities, etc. It is important to note that capital gains attract taxes, the percentage of which varies according to the number of years of investment.

Income

Some individuals invest with the objective of generating a second source of income.Consequently, they invest in products that offer returns regularly like bank fixeddeposits, corporate and government bonds, etc.

Other objectives

While the aforementioned objectives are the most common ones among investors today, some other objectives include: Tax exemption Some people invest their money in various financial products solely for reducing their tax liability. Some products offer tax exemptions while many offer tax benefits on long-term profits. Liquidity Many investment options are not liquid. This means they cannot be sold and converted into cash instantly. However, some people prefer investing in options that can be used during emergencies. Such liquid instruments include stock, money market instruments and exchange-traded funds, to name a few.

Investment environment
Competitive advantages of Bulgaria

Economic and political stability; Financial stability - Currency Board until entry into the Eurozone; Membership in NATO and EU; Strategic geographic location; Liberalized access to markets with more than 560 million consumers; The lowest corporate tax in the EU: 10%; Zero percent capital gains tax for investments in 152 municipalities with high unemployment (out of 264 municipalities); Increased depreciation rates (50%) for investment in new machinery, industrial equipment and appliances, computers, peripheral devices and software; Use of tax credit under the special procedure for charging VAT on imports for the implementation of investment projects over BGN 10 million; 5% withholding tax on dividends; 10% "flat tax" on personal income; 1 procedure, 1 charge up to 2 days to register a company in the electronic commercial register of the Registry Agency;

Continuing improvement of the administrative environment - removed or alleviated are 83% of all regimes proposed for mitigation; Removal of the unnecessary, mitigation and transfer of some regulatory regimes of the NGO sector; The lowest operational costs in the EU; Incentives for Promotion Act. promotion of investment under the Investment