Portfolio evaluating refers to the evaluation of the performance of the investment portfolio. It is essentially the process of comparing the return earned on a portfolio with the return earned on one or more other portfolio or on a benchmark portfolio. Portfolio performance evaluation essentially comprises of two functions, performance measurement and performance evaluation. Performance measurement is an accounting function which measures the return earned on a portfolio during the holding period or investment period. Performance evaluation, on the other hand, address such issues as whether the performance was superior or inferior, whether the performance was due to skill or luck etc. The ability of the investor depends upon the absorption of latest developments which occurred in the market. The ability of expectations if any, we must able to cope up with the wind immediately. Investment analysts continuously monitor and evaluate the result of the portfolio performance. The expert portfolio Continue reading
Investment Analysis
An Introduction to Hedge Funds
What are Hedge Funds? A hedge fund is a type of private placement investment that is managed by investment management firms and is made up of sophisticated or institutional investors. The fundamental reason why various individuals participate in hedge funds is to protect themselves from losses in other assets. Managers of investment pools employ a variety of tactics, including leverage and esoteric asset trading, in an attempt to outperform the markets in terms of returns. Hedge funds invest in portfolios built with high risk management strategies in order to produce large returns even in the worst-case scenarios. Hedge funds displays multiple characteristics which are discussed below: Hedge funds are financial instruments which requires investment of large amount of capital and thus is not available to general public just as mutual funds are. Hedge funds are not regulated like mutual funds are which makes them highly risky asset acting as the Continue reading
Basic Investment Objectives
Investing is a wide spread practice and many have made their fortunes in the process. The starting point in this process is to determine the characteristics of the various investments and then matching them with the individuals need and preferences. All personal investing is designed in order to achieve certain objectives. These objectives may be tangible such as buying a car, house etc. and intangible objectives such as social status, security etc. similarly; these objectives may be classified as financial or personal objectives. Financial objectives are safety, profitability, and liquidity. Personal or individual objectives may be related to personal characteristics of individuals such as family commitments, status, dependents, educational requirements, income, consumption and provision for retirement etc. The basic objectives of investment can be classified on the basis of the investors approach as follows: Short term high priority objectives: Investors have a high priority towards achieving certain objectives in a Continue reading
Impact of Interest Bearing Securities in Portfolio Management
Money market is a segment of the financial market where the securities are traded for shorter term and the risk associated with the money market is comparatively lower than the capital market. On the other hand, capital market is that section of the financial, market where the securities are traded for longer term and the risk is higher than the money market. The securities, which yield interest, are referred as the interest bearing securities. There are two types of interest bearing securities. One is fixed interest-bearing securities and the other is variable interest securities. The key interest rate in the capital market includes interest on public corporation bonds, government bonds, and rates on deposit of long-term debentures. The interest bearing securities in the money market include Treasury bill, commercial paper, certificate of deposits, money market bonds. The interest rate is the yield, which is paid to the owner of the Continue reading
Types of Issue of Shares in Indian Capital Market
The primary issue market is that component of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock. In the case of a new stock issue, this sale is an initial public offering (IPO). Primary markets create long term instruments through which corporate entities borrow from capital market. Primary market provides opportunity to issuers of securities, government as well as corporate, to raise resources to meet their requirements of investments and/or discharge some obligation. Primary market also known as New Issue Market as it deals with new securities which are not previously available and are offered for the investment to the public for the first time. The primary market enjoys neither any tangible form nor any administrative organizational set-up and is not subject to any centralized control and administration for the execution of Continue reading
Industry Analysis and Investment Decision
An investor must examine the industry in which a company operates because this can have a tremendous effect on its results, and even its existence. A company’s management may be superior, its balance sheet strong and its reputation enviable. However, the company may not have diversified and the industry within which it operates may be in a depression. This can result in a tremendous decline in revenues and even threaten the viability of the company. The first step in industry analysis is to determine the cycle it is in, or the stage of maturity of the industry. All industries evolve through the following stages: The Entrepreneurial or Nascent Stage: At the first stage, the industry is new and it can take some time for it to properly establish itself. In the early days, it may actually make losses. At this time there may also not be many companies in the Continue reading