Page 6 - DCOM507_STOCK_MARKET_OPERATIONS

Rupesh Roshan Singh, Lovely Professional University
Unit 1: Basics of Investment

Unit 1: Basics of Investment Notes

CONTENTS
Objectives

Introduction
1.1 Concept of Investment
1.1.1 How Do We Invest?
1.1.2 Nature of Investment Decisions
1.2 The Investment Process
1.3 Features of Investments
1.3.1 Investment Alternatives
1.4 Types of Investors
1.4.1 Other Type According to Researcher
1.4.2 According to a New Study

1.5 Summary
1.6 Keywords
1.7 Review Questions
1.8 Further Readings

Objectives

After studying this unit, you will be able to:

Explain the concept of Investment
Discuss the investment process
Elaborate the features of Investments
Discuss the types of Investors
Introduction

Investment involves making of a sacrifice in the present with the hope of deriving future
benefits. Investment has many meanings and facets. The two most important features of an
investment are current sacrifice and future benefit. We can identify a variety of activities which
display the two features of investment. For example, a portfolio manager buys 10,000 shares of
ITC Ltd. for his mutual fund; your relative may have subscribed to the 6-year Post Office Monthly
Income Scheme. A corporate firm may spend ` 5 crores for expansion programmers; a middle-
aged man with a family decides to spend ` 10 lakhs to buy an apartment in a city and so on. All
these constitute investment activities because they involve current sacrifice of consumption and
hope of future gain.
In other words, investment refers to a commitment of funds to one or more assets that will be
held over some future time period. Almost all individuals have wealth of some kind, ranging
from the value of their services in the workplace to tangible assets to monetary assets. Anything
not consumed today and saved for future use can be considered an investment. For our purposes,
investment will mean a measurable asset retained in order to increase one’s personal wealth.

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