INVESTMENT ENVIRONMENT

Investment refers to well planned and rationally formulated programme which

involves deployment of funds with the sole objective to earn additional income. It is
an art and science to deploy funds in such growth oriented channels which can
generate some yield. The investment is widely used in business and society. The
consumers use the term investment as the commitment of money in some assets as for
example investment in housing or motor vehicle. The term investment as used by
businessman implies as financial investment which is concerned with the deployment
of funds with the objective of realising additional income or growth in value of
investment at a future date.
Investment is commitment of funds that is expected to generate additional money.
Keeping cash in the locker is not an investment as it does not generate any income
rather its value may be eroded by inflation. However, keeping money in a savings
bank a/c is an investment as it generates income by way of interest. An investor buys
shares of a particular company in expectation of getting a dividend.

DEFINITIONS OF INVESTMENT: The following are some noteworthy definitions

of investment:

1. Fisher and Jordan: An investment is a commitment of funds made in the

expectation of some positive rate of return. If the investment is properly
undertaken the return will commensurate with the risk the investor assumes.
2. Amling: Investment may be defined as the purchase by an individual or
institutional investor of a financial or real asset that produces a return proportional
to the risk assumed over some future investment period.
Investment is defined as the commitment of funds for a period of time in order to
derive a future flow of funds that will compensate investing unit for the time the
funds are committed, for the expected rate of inflation and also for the uncertainty
involved in the funds flow of funds.

When you invest, you buy something that you expect will grow in value and provide
a profit, either in the short term or over an extended period. You can choose among a
vast universe of investment alternatives, from art to real estate. When it comes to

1
financial investments, most people concentrate on three core categories: stocks, bonds,
and cash equivalents. You can invest in these asset classes directly or through mutual
funds and exchange-traded funds (ETFs).

Many financial investments including stocks, bonds, and mutual funds and ETFs that
invest in these assets are legally considered to be securities under the federal securities
laws. Securities tend to be widely available, easily bought and sold, and subject to
federal, state, and private-sector regulation. However, investing in securities carries
certain risks. Thats because the value of your investment fluctuates as the market
price of the security changes in response to investor demand. As a result, you can
make money, but you can also lose some or all of your original investment.

In finance, investment is the purchase of an asset or item with the hope that it will
generate income or appreciate in the future and be sold at the higher price. It generally
does not include deposits with a bank or similar institution. The term investment is
usually used when referring to a long-term outlook. This is the opposite of trading
or speculation, which are short-term practices involving a much higher degree of risk.
Financial assets take many forms and can range from the ultra-safe low
return government bonds to much higher risk higher reward international stocks.

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 INVESTMENT OBJECTIVES

A) FINANCIAL OBJECTIVES: The following are the financial objectives of

investment:
1. Safety of Investment:
It is necessary that the investment should be safe. The safety sought in
investment implies protection against loss under normal conditions. It calls
for careful review of economic and industry trends before deciding types
and or timings of investment.
2. Liquidity of Investment:
An investment is a liquid asset if it can be converted into cash without delay
at full market value in any quantity. For an investment to be liquid it must
be a) reversible or b) marketable. The difference between reversibility and
marketability is that reversibility is the process whereby the transaction is
reversed or terminated while marketability involves that the sale of the
investment in the market for cash.
3. Stability of Income:
Stability of income is essentially important. An investor must consider
stability of monetary income and stability of purchasing power of income.
Income stability may not always be consistent due to changes in investment
climate.
4. Profitability:
Investors purchase securities in the hope of getting profit in the forum of
dividend. Efficiency of a business depends upon profitability. An investor
looks into the expected returns, taking into account the tax benefits if any.
One must also consider the regularity and the periodicity of returns. Some
investments such as equity shares my appreciate in their value over time
and some may depreciate. Such changes in capital values should also be
considered to evaluate the profitability of an investment.

B) PERSONAL OBJECTIVES: All investors are savers but all savers are not
investors. Savings are sometimes induced by the incentives like fiscal
concessions or income or capital appreciation. The number of investors in India
is 30-50 million. Savers from all classes except in the case of 37% of the

3
 population which is below the poverty line. The main objective and motives
behind investment by the investors are as follows:
1. Tax Benefits:
To plan an investment programme without regard to one tax status may be
costly to the investor. There are really two problems involved here. One
concerned with the amount of income paid by the investment and the other
with burden of income taxes upon that income. When investors incomes are
small, they are anxious to have maximum cash returns on their investments
and are prone to take excessive risks. On the other hand, investors who are
not pressed for cash income less than others, thus affecting their choices .
2. Purchasing Power:
Investment involves the commitment of current funds with the objective of
receiving greater amounts of future funds. The purchasing power of the
future funds should be considered by the investor. For maintaining
purchasing power stability, investor should carefully study a) the degree of
price level inflation they expect, b) the possibilities of gain and loss in the
investment available to them and c) the limitations imposed by personal and
family considerations.
3. Concealability:
To be safe from social disorders, government confiscation or unacceptable
levels of taxation, property must be concealable and leave no record of
income received from its use or sale. Gold and precious stones have long
been esteemed for these purposes because they combine high value with
small bulk and are readily transferable.

When you invest, you buy something that you expect will grow in value and provide a
profit, either in the short term or over an extended period. You can choose among a
vast universe of investment alternatives, from art to real estate. When it comes to
financial investments, most people concentrate on three core categories: stocks, bonds,
and cash equivalents. You can invest in these asset classes directly or through mutual
funds and exchange-traded funds (ETFs).

Many financial investments including stocks, bonds, and mutual funds and ETFs that
invest in these assets are legally considered to be securities under the federal securities

4
laws. Securities tend to be widely available, easily bought and sold, and subject to
federal, state, and private-sector regulation. However, investing in securities carries
certain risks. Thats because the value of your investment fluctuates as the market
price of the security changes in response to investor demand. As a result, you can
make money, but you can also lose some or all of your original investment.

TYPES OF INVESTMENT

1. DIRECT INVESTMENT:

The purpose of a direct investment is to gain enough control of a company to exercise

control over future decisions. This can be accomplished by gaining a majority interest
or a significant minority interest. Direct investments can involve management
participation, joint-venture or the sharing of technology and skills. The purchase or
5
acquisition of a controlling interest in a foreign business by means other than the
outright purchase of shares.
In domestic finance, the purchase or acquisition of a controlling interest or a smaller
interest that would still permit active control of the company.

2. INDIRECT INVESTMENT:

When there is an intermediary between the Investor and Investment that is indirect
investment. The investor hand over his finances to the investment company that will
invest the amount further and give him returns. (Usually an investment company does
not invest in a single investment, rather divide that investment into smaller units and
divide among investors that helps to reduce the risk.) It is on the discretion of the
investment company where to invest the finances, the investor will get his agreed rate
of return.
An indirect investment is a type of investing opportunity that does not require the
actual purchase of the asset that ultimately generates the return. This type of
arrangement is often associated with investing in real estate ventures, typically by
purchasing stocks issued by a real estate company that in turn purchases and maintains
the properties generating the dividends issued to the shareholders. There are a number
of benefits to indirect investment, including the ability to avoid having to be directly
involved in the management and upkeep of the assets involved.

3. EQUITY INVESTMENT:

The investment in the equity shares of a company is called equity investment. That
can be in common stock or preferred stock.

Investing in the stock market is a way of life in the United States, and most of these
are equity investments. Even if a depositor in a bank or credit union has only a few
hundred dollars in deposits, he or she is indirectly an equity investor through the
bank's stock portfolio. This is a long-term stock investment strategy whereby profits
are realized through dividend payments and capital gains accrued on the equity of a
particular stock.

6
The great majority of equity investors do not actually hold the securities, or
certificates. Instead, they have an account with a bank or a fund manager who has
physical access to these stock certificates. Therefore, equity capital is money gained
by a company in exchange for a share of ownership in the company. Equity
investment is sort of a loan to the company that is paid back or not by way of
dividends paid out of company profits or through the sale of ownership rights.

The value of a property, less any debts owed on the property, is whats known as
equity. In the case of equity investment, the property is in the form of stock
certificates and any debt is actually devaluation of the security. This devaluation may
be incurred by a number of causes, from financial to foolish.

4. DEBT INVESTMENT:

The investment in bonds, loans, deposits and debentures is debt investment.

A debt investment essentially is a loan given to companies or individuals to cover

property or projects. Later, they pay you back, usually with interest. If the property or
project is pledged as collateral for your loan (mortgaged), you may reclaim the
property or project.

Debt investment most often involves debt securities rather than debt equity. With debt
security, you don't own the property or get profits. With debt equity, you actually have
ownership of a portion of the company's assets.

Even when people make decent incomes, they typically want to find ways to ensure
that money will be available for the future. The result is that many people, at one
time or another, seek to invest their funds in order to gain a financial return. Often, a

safe investment option is debt investment.

5. DERIVATIVE SECURITIES INVESTMENT:

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Investment in paper assets such as options, futures, and contracts is known as
derivative securities investment.

There is a physical asset involved behind these investments.

The value of investment is measured on the basis of underlying assets.
A security whose price is dependent upon or derived from one or more underlying
assets. The derivative itself is merely a contract between two or more parties. Its value
is determined by fluctuations in the underlying asset. The most common underlying
assets include stocks, bonds, commodities, currencies, interest rates and market
indexes. Most derivatives are characterized by high leverage.
Derivatives are generally used as an instrument to hedge risk, but can also be used for
speculative purposes. For example, a European investor purchasing shares of an
American company off of an American exchange (using U.S. dollars to do so) would
be exposed to exchange-rate risk while holding that stock. To hedge this risk, the
investor could purchase currency futures to lock in a specified exchange rate for the
future stock sale and currency conversion back into Euros.
6. HIGH RISK INVESTMENT:
The investment in securities like Futures, Junk Bonds or Speculative Bonds are
considered high risk investments. The major risk is the Interest Rate Risk that cause
variability in their value. Thus they provide high yield in compare to other securities.
The chance that an investment's actual return will be different than expected. Risk
includes the possibility of losing some or all of the original investment. Different
versions of risk are usually measured by calculating the standard deviation of
the historical returns or average returns of a specific investment. A high standard
deviation indicates a high degree of risk.
A fundamental idea in finance is the relationship between risk and return. The greater
the amount of risk that an investor is willing to take on, the greater the potential
return. The reason for this is that investors need to be compensated for taking on
additional risk.
7. LOW RISK INVESTMENT:

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The investment in securities like Treasury Bills, Bonds and stocks are low risk
investments thus yield low return as well.
Preferred Stock:
Preferred stock is a hybrid security that trades like a stock but acts like a bond in many
respects. It has a stated dividend rate that is usually around 2% higher than what CDs
or treasuries pay, and usually trades within a few dollars of the price at which it was
issued (typically $25 per share).

There are a few types of preferred stock:

Cumulative Preferred. Accumulates any dividends that the issuing company
cannot pay due to to financial problems. When the company is able to catch up
on its obligations, then all past due dividends will be paid to shareholders.
Participating Preferred. Allows shareholders to receive larger dividends if the
company is doing well financially.
Convertible Preferred. Can be converted into a certain number of shares of
common stock.

Utility Stock:

Like preferred stock, utility stocks tend to remain relatively stable in price, and pay
dividends of about 2% to 3% above treasury securities. The other major characteristics
of utility stocks include:

Utility stocks are common stocks and come with voting rights.
Their share prices are generally not as stable as preferred offerings.
They are noncyclical stocks, which means that their prices do not rise and fall
with economic expansion and contraction like some sectors, such as technology or
entertainment. Because people and businesses always need gas, water, and
electricity regardless of economic conditions, utilities are one of the most defensive
sectors in the economy.

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 Utility stocks are also often graded by the ratings agencies in the same manner
as bonds and preferred issues, are fully liquid like preferred stocks, and can be sold
at any time without penalty.
Utility stocks typically carry slightly higher market risk than preferred issues
and are also subject to taxation on both dividends and any capital gains.

Fixed Annuities:

Fixed annuities are designed for conservative retirement savers who seek higher yields
with safety of principal. These instruments possess several unique features, including:

They allow investors to put a virtually unlimited amount of money away and
let it grow tax-deferred until retirement.
The principal and interest in fixed contracts is backed by both the financial
strength of the life insurance companies that issue them, as well as by state
guaranty funds that reimburse investors who purchased an annuity contract from an
insolvent carrier. Although there have been instances of investors who lost money
in fixed annuities because the issuing company went bankrupt, the odds of this
happening today are extremely low, especially if the contract is purchased from a
financially sound carrier.
8. SHORT TERM INVESTMENT:
The investment in securities which are matured within a year is short term investment.
An account in the current assets section of a company's balance sheet. This account
contains any investments that a company has made that will expire within one year.
For the most part, these accounts contain stocks and bonds that can be liquidated fairly
quickly.
Most companies in a strong cash position have a short-term investments account on the
balance sheet. This means that a company can afford to invest excess cash in stocks
and bonds to earn higher interest than what would be earned from a normal savings
account.

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 LONG TERM INVESTMENT:

The investment in securities which have maturation life of over a year or have no
limited maturity life like stocks is long term investment.

An account on the asset side of a company's balance sheet that represents the
investments that a company intends to hold for more than a year. They may include
stocks, bonds, real estate and cash. A common form of this type of investing occurs
when company A invests largely in company B and gains significant influence over
company B without having a majority of the voting shares. In this case, the purchase
price would be shown as a long-term investment.

Domestic Investment:

Investing within the premises of the country is called domestic investment.

Foreign Investment:

Whereas investment in foreign countries or either in foreign currency securities within

own country is foreign investment.

Flows of capital from one nation to another in exchange for significant ownership
stakes in domestic companies or other domestic assets. Typically, foreign investment
denotes that foreigners take a somewhat active role in management as a part of their
investment. Foreign investment typically works both ways, especially between
countries of relatively equal economic stature.

Currently there is a trend toward globalization whereby large, multinational firms

often have investments in a great variety of countries. Many see foreign investment in
a country as a positive sign and as a source for future economic growth. The U.S.
Commerce Department encourages foreign investment through its "Invest in America"
initiative.

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 INVESMENT ENVIRONMENT

The field of study which involves the study of investment environment, investment
process and investment securities and markets.

Investment Environment:

Types of Securities:

Investments are a great way to grow your money. They allow you to potentially have
more money at retirement or for other investment goals than if you just put your
earnings in a bank. There are many different securities that you can invest your money
in. They're usually divided into two categories. Equity securities grant you partial
ownership of a company. Debt securities are considered loans to companies or entities
of the government. Here's a quick refresher on some of the most popular security
investments.

Stocks:

Stocks are the best known equity security. You're purchasing an ownership interest in
a company when you buy stock. You're entitled to a portion of company profits and
sometimes shareholder voting rights.

Stock prices can fluctuate greatly. Investors try to buy stock when the price is low and
sell it when the price is high. Stock has a higher investment risk than most other
securities. There's no guarantee that you won't lose money. However, stock usually has
the potential for the greatest returns.

12
Most stock is considered common stock. Preferred stock normally offers dividends but
not voting rights. Common stockholders also have greater potential for higher returns.

Corporate Bonds:

A corporate bond is a debt instrument issued by a company. It's a loan to the company
when you invest in a bond. You're entitled to receive interest each year on the loan
until it's paid off.

Bonds are safer and more stable than stocks. You're guaranteed a steady income from
bonds. However, bondholders aren't entitled to dividends or voting rights. In addition,
stockholders have potential for greater returns in the long run.

Government Bonds:

Government bonds are issued by the US federal government. The most common are
US Treasury bonds. They're issued to help finance the national debt.

Government bonds have very low investment risk. In fact, they're virtually risk-free
since they're guaranteed by the US government. However, the potential return is lower
than stocks and corporate bonds.

Municipal Bonds:
Municipal bonds are debt securities from states and local government entities. These
local entities include counties, cities, towns and school districts. The interest income
you earn on the municipal bonds is usually exempt from federal income taxes. It may
also be exempt from state and local income taxes if you live where the bonds are
issued. However, the interest rate is usually lower than corporate bonds.
Mutual Funds:
A mutual fund is made up of a variety of securities. It may focus on stocks, bonds or a
collection of both. Your money is usually pooled with other investors. An investment
company chooses the securities and manages the mutual fund. This diversity helps
decrease investment risk.

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 Stock Options:
A stock option is the right to buy or sell a stock at a certain price for a period of time.
A call is the right to buy the stock. A put is the right to sell the stock. Stock options
can be used to help reduce your investment risk.
Futures Options:
A futures contract is an agreement to sell a specific commodity at a future date for an
agreed upon price. A futures option is the right to buy or sell a futures contract at a
certain price for a specific period of time. Many investors use futures options to help
reduce investment risk.

TYPES OF FINANCIAL MARKETS:

A financial market is a broad term describing any market place where buyers and
sellers participate in the trade of assets such as equities, bonds, currencies and
derivatives. Financial markets are typically defined by having transparent pricing,
basic regulations on trading, costs and fees, and market forces determining the prices
of securities that trade.

Financial markets can be found in nearly every nation in the world. Some are very
small, with only a few participants, while others - like the New York Stock Exchange
(NYSE) and the forex markets - trade trillions of dollars daily.
Investors have access to a large number of financial markets and exchanges
representing a vast array of financial products. Some of these markets have always
been open to private investors; others remained the exclusive domain of major
international banks and financial professionals until the very end of the twentieth
century.
Capital Markets:
A capital market is one in which individuals and institutions trade financial securities.
Organizations and institutions in the public and private sectors also often sell
securities on the capital markets in order to raise funds. Thus, this type of market is
composed of both the primary and secondary markets.

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Any government or corporation requires capital (funds) to finance its operations and
to engage in its own long-term investments. To do this, a company raises money
through the sale of securities - stocks and bonds in the company's name. These are
bought and sold in the capital market.
Stock markets:
Stock markets allow investors to buy and sell shares in publicly traded companies.
They are one of the most vital areas of a market economy as they provide companies
with access to capital and investors with a slice of ownership in the company and the
potential of gains based on the companys future performance.

This market can be split into two main sections: the primary market and the secondary
market. The primary market is where new issues are first offered, with any subsequent
trading going on in the secondary market.
Bond Markets:
A bond is a debt investment in which an investor loans money to an entity (corporate
or governmental), which borrows the funds for a defined period of time at a fixed
interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign
governments to finance a variety of projects and activities. Bonds can be bought and
sold by investors on credit markets around the world. This market is alternatively
referred to as the debt, credit or fixed-income market. It is much larger in nominal
terms that the world's stock markets. The main categories of bonds are corporate
bonds, municipal bonds, and U.S. Treasury bonds, notes and bills, which are
collectively referred to as simply "Treasuries."
Money Market:
The money market is a segment of the financial market in which financial instruments
with high liquidity and very short maturities are traded. The money market is used by
participants as a means for borrowing and lending in the short term, from several days
to just under a year. Money market securities consist of negotiable certificates of
deposit (CDs), banker's acceptances, U.S. Treasury bills, commercial paper,
municipal notes, Eurodollars, federal funds and repurchase agreements

15
(repos). Money market investments are also called cash investments because of their
short maturities.
The money market is used by a wide array of participants, from a company raising
money by selling commercial paper into the market to an investor purchasing CDs as
a safe place to park money in the short term. The money market is typically seen as a
safe place to put money due the highly liquid nature of the securities and short
maturities. Because they are extremely conservative, money market securities offer
significantly lower returns than most other securities. However, there are risks in the
money market that any investor needs to be aware of, including the risk of default on
securities such as commercial paper.
Cash or Spot Market:
Investing in the cash or "spot" market is highly sophisticated, with opportunities for
both big losses and big gains. In the cash market, goods are sold for cash and are
delivered immediately. By the same token, contracts bought and sold on the spot
market are immediately effective. Prices are settled in cash "on the spot" at current
market prices. This is notably different from other markets, in which trades are
determined at forward prices.
The cash market is complex and delicate, and generally not suitable for inexperienced
traders. The cash markets tend to be dominated by so-called institutional market
players such as hedge funds, limited partnerships and corporate investors. The very
nature of the products traded requires access to far-reaching, detailed information and
a high level of macroeconomic analysis and trading skills.
Derivatives Markets:
The derivative is named so for a reason: its value is derived from its underlying asset
or assets. A derivative is a contract, but in this case the contract price is determined by
the market price of the core asset. If that sounds complicated, it's because it is. The
derivatives market adds yet another layer of complexity and is therefore not ideal for
inexperienced traders looking to speculate. However, it can be used quite effectively
as part of a risk management program.

Examples of common derivatives are:

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forwards, futures, options, swaps and contracts-for-difference(CFDs). Not only are
these instruments complex but so too are the strategies deployed by this market's
participants. There are also many derivatives, structured products and collateralized
obligations available, mainly in the over-the-counter (non-exchange) market, that
professional investors, institutions and hedge fund managers use to varying degrees
but that play an insignificant role in private investing.

Forex and the Interbank Market:

The interbank market is the financial system and trading of currencies among banks
and financial institutions, excluding retail investors and smaller trading parties. While
some interbank trading is performed by banks on behalf of large customers, most
interbank trading takes place from the banks' own accounts.
The forex market is where currencies are traded. The forex market is the largest, most
liquid market in the world with an average traded value that exceeds $1.9 trillion per
day and includes all of the currencies in the world. The forex is the largest market in
the world in terms of the total cash value traded, and any person, firm or country may
participate in this market.
There is no central marketplace for currency exchange; trade is conducted over the
counter. The forex market is open 24 hours a day, five days a week and currencies are
traded worldwide among the major financial centers of London, New York, Tokyo,
Zrich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
Until recently, forex trading in the currency market had largely been the domain of
large financial institutions, corporations, central banks, hedge funds and extremely
wealthy individuals. The emergence of the internet has changed all of this, and now it
is possible for average investors to buy and sell currencies easily with the click of a
mouse through online brokerage accounts.
Primary Markets vs. Secondary Markets:

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A primary market issues new securities on an exchange. Companies, governments and
other groups obtain financing through debt or equity based securities. Primary
markets, also known as "new issue markets," are facilitated by underwriting groups,
which consist of investment banks that will set a beginning price range for a given
security and then oversee its sale directly to investors.
The primary markets are where investors have their first chance to participate in a new
security issuance. The issuing company or group receives cash proceeds from the sale,
which is then used to fund operations or expand the business.
The secondary market is where investors purchase securities or assets from other
investors, rather than from issuing companies themselves. The Securities and
Exchange Commission (SEC) registers securities prior to their primary issuance, then
they start trading in the secondary market on the New York Stock Exchange, Nasdaq
or other venue where the securities have been accepted for listing and trading.
The secondary market is where the bulk of exchange trading occurs each day. Primary
markets can see increased volatility over secondary markets because it is difficult to
accurately gauge investor demand for a new security until several days of trading have
occurred. In the primary market, prices are often set beforehand, whereas in the
secondary market only basic forces like supply and demand determine the price of the
security.
Secondary markets exist for other securities as well, such as when funds, investment
banks or entities such as Fannie Mae purchase mortgages from issuing lenders. In any
secondary market trade, the cash proceeds go to an investor rather than to the
underlying company/entity directly.
The OTC Market:
The over-the-counter (OTC) market is a type of secondary market also referred to as a
dealer market. The term "over-the-counter" refers to stocks that are not trading on a
stock exchange such as the Nasdaq, NYSE or American Stock Exchange (AMEX).
This generally means that the stock trades either on the over-the-counter bulletin
board (OTCBB) or the pink sheets. Neither of these networks is an exchange; in fact,
they describe themselves as providers of pricing information for securities. OTCBB
and pink sheet companies have far fewer regulations to comply with than those that

18
trade shares on a stock exchange. Most securities that trade this way are penny
stocks or are from very small companies.
Third and Fourth Markets:
You might also hear the terms "third" and "fourth markets." These don't concern
individual investors because they involve significant volumes of shares to be
transacted per trade. These markets deal with transactions between broker-dealers and
large institutions through over-the-counter electronic networks. The third
market comprises OTC transactions between broker-dealers and large institutions.
The fourth market is made up of transactions that take place between large
institutions. The main reason these third and fourth market transactions occur is to
avoid placing these orders through the main exchange, which could greatly affect the
price of the security. Because access to the third and fourth markets is limited, their
activities have little effect on the average investor.

Financial institutions and financial markets help firms raise money. They can do this
by taking out a loan from a bank and repaying it with interest, issuing bonds to borrow
money from investors that will be repaid at a fixed interest rate, or offering investors
partial ownership in the company and a claim on its residual cash flows in the form of
stock.

TYPES OF INVESTMENT COMPANIES:

Unit Investment Trusts (UITs).

A unit investment trust, or UIT, is a company established under an indenture
or similar agreement. It has the following characteristics:
The management of the trust is supervised by a trustee.
Unit investment trusts sell a fixed number of shares to unit holders, who
receive a proportionate share of net income from the underlying trust.
The UIT security is redeemable and represents an undivided interest in a
specific portfolio of securities.
The portfolio is merely supervised, not managed, as it remains fixed for the life
of the trust. In other words, there is no day-to-day management of the portfolio.

Face Amount Certificates:

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A face amount certificate company issues debt certificates at a predetermined rate of
interest. Additional characteristics include:
Certificate holders may redeem their certificates for a fixed amount on a
specified date, or for a specific surrender value, before maturity.

Certificates can be purchased either in periodic installments or all at once with

a lump-sum payment.

Face amount certificate companies are almost nonexistent today.

Management Investment Companies:

The most common type of investment company is the management investment
company, which actively manages a portfolio of securities to achieve its investment
objective. There are two types of management investment company: closed-
end and open-end. The primary differences between the two come down to where
investors buy and sell their shares in the primary or secondary markets and the type of
securities they sell.

Closed-End Investment Companies: A closed-end investment company

issues shares in a one-time public offering. It does not continually offer new
shares, nor does it redeem its shares like an open-end investment company.
Once shares are issued, an investor may purchase them on the open market and
sell them in the same way. The market value of the closed-end fund's shares
will be based on supply and demand, much like other securities. Instead of
selling at net asset value, the shares can sell at a premium or at a discount to the
net asset value.
Open-End Investment Companies: Open-end investment companies, also
known as mutual funds, continuously issue new shares. These shares may only
be purchased from the investment company and sold back to the investment
company. Mutual funds are discussed in more detail in the Variable Contracts
section.

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 INVESTMENT MANAGEMENT PROCESS

Investment management process is the process of managing money or funds. The

investment management process describes how an investor should go about making
decisions.
Investment management process can be disclosed by five-step procedure, which
includes following stages:
1 Setting of investment policy.
2 Analysis and evaluation of investment vehicles.
3 Formation of diversified investment portfolio.
4 Portfolio revision
5 Measurement and evaluation of portfolio performance.
Setting of investment policy: is the first and very important step in investment
management process. Investment policy includes setting of investment objectives. The
investment policy should have the specific objectives regarding the investment return
requirement and risk tolerance of the investor. For example, the investment policy
may define that the target of the investment average return should be 15 % and should
avoid more than 10 % losses. Identifying investors tolerance for risk is the most
important objective, because it is obvious that every investor would like to earn the
highest return possible. But because there is a positive relationship between risk and
return, it is not appropriate for an investor to set his/ her investment objectives as just
to make a lot of money. Investment objectives should be stated in terms of both risk
and return.

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 The investment policy should also state other important constrains which
could influence the investment management. Constrains can include any liquidity
needs for the investor, projected investment horizon, as well as other unique needs and
preferences of investor. The investment horizon is the period of time for investments.
Projected time horizon may be short, long or even indefinite.
Setting of investment objectives for individual investors is based on the assessment of
their current and future financial objectives. The required rate of return for investment
depends on what sum today can be invested and how much investor needs to have at
the end of the investment horizon. Wishing to earn higher income on his / her
investments investor must assess the level of risk he /she should take and to decide if
it is relevant for him or not. The investment policy can include the tax status of the
investor. This stage of investment management concludes with the identification of the
potential categories of financial assets for inclusion in the investment portfolio. The
identification of the potential categories is based on the investment objectives, amount
of investable funds, investment horizon and tax status of the investor. we could see
that various financial assets by nature may be more or less risky and in general their
ability to earn returns differs from one type to the other. As an example, for the
investor with low tolerance of risk common stock will be not appropriate type of
investment.
Analysis and evaluation of investment vehicles: When the investment
policy is set up, investors objectives defined and the potential categories of financial
assets for inclusion in the investment portfolio identified, the available investment
types can be analysed. This step involves examining several relevant types of
investment vehicles and the individual vehicles inside these groups. For example, if
the common stock was identified as investment vehicle relevant for investor, the
analysis will be concentrated to the common stock as an investment. The one purpose
of such analysis and evaluation is to identify those investment vehicles that currently
appear to be mispriced. There are many different approaches how to make such
analysis. Most frequently two forms of analysis are used: technical analysis and
fundamental analysis.

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 INVESTMENT SECURITIES
Types of securities:
Debt securities - are securities that give their holder the right to receive fixed
interest rates (income) and transferred to a refund in the amount of debt, carried out by
a certain date. In Russia, the debt securities are dennymi: Treasuries of the State;
savings certificates; bills; bonds.

Treasury of the state - a kind of securities placed by the state. Buying Treasury
Bill, the owner is making money in the budget of the state in exchange for it, for the
duration of ownership of treasury bills, receives a fixed income, and at the end of this
term gets invested amount back.

Savings certificates - a written certificate issued by the lending institution, the

deposit of funds. Their investor is entitled to receive the deposit and interest thereon,
but only when the term of the certificate of ownership comes to an end. Certificates
may be bearer or registered shares.

Promissory note - a written promissory note completed by a strict form prescribed

by the exchange. It gives the owner (note holder) an exclusive right upon the
expiration of the obligation to demand from the drawer (the debtor) the payment of a
sum of money specified in the bill.

Bonds - a kind of debt securities, which is the obligation of the issuer (the company
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that issued bonds) to return to the creditor (owner of the securities), the nominal value
of its bonds as soon as the end in a timely manner. Also, the obligation of the issuer is
a periodic payment to the creditor interest.

CONCLUSION
As you can see, international investment, like many aspects of globalization, presents
opportunities as well as challenges. You may wonder where the balance of costs and
benefits lies. The question is particularly acute for developing countries: many of the
greatest controversies about financial liberalization covered in this issue brief are
raised when investment flows from developed to developing countries. To be sure,
many of the problems of developing countries stem from internal deficiencies,
ranging from the inadequate supervision of the banking sector to corruption or
inadequate labor and environmental standards.
Understand the term investment and factors used to differentiate types of investments.
Describe the investment process and types of investors. Discuss the principal types of
investment vehicles. Describe the steps in investing and review fundamental personal
tax considerations. Discuss investing over the life cycle and in different economic
environments.

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BIBLIOGRAPHY:

Investment Management, Himalaya Publishing House.

-Avadhani, V.A

Investment Management, Himalaya Publishing House.

-Preeti Singh.

WEBSITES:

www.google.com
www.wikipedia.c

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