Essentials of Investments: Chapter 1 - Investments - Background and Issues includes Investments & Financial Assets, The Investment Process, Active vs. Passive Management, Major Classes of Financial Assets or Securities.
Trang 1Chapter 1
Investments - Background and Issues
Trang 2Investments & Financial Assets
• Essential nature of investment
– Reduced current consumption – Planned later consumption
• Real Assets
– Assets used to produce goods and services
• Financial Assets
Trang 3The Investment Process
• Asset allocation
• Security selection
• Risk-return trade-off
• Market efficiency
• Active vs passive management
Trang 4Active vs Passive Management
Active Management
• Finding undervalued securities
• Timing the market Passive Management
• No attempt to find undervalued securities
Trang 5• Debt
– Money market instruments – Bonds
• Common stock
• Preferred stock
• Derivative securities
Trang 6Investments and Innovation
Technology and Delivery of Service
• Computer advancements
• More complete and timely information Globalization
• Domestic firms compete in global markets
Trang 7Key Trends - Globalization
International and Global Markets Continue Developing
• Managing foreign exchange
• Diversification to improve performance
• Instruments and vehicles continue
to develop
• Information and analysis improves
Trang 8Key Trends - Securitization
Securitization & Credit Enhancement
• Offers opportunities for investors and originators
• Changes in financial institutions and regulation
• Improvement in information
Trang 9Financial Engineering
Repackaging Services of Financial Intermediaries
• Bundling and unbundling of cash flows
• Slicing and dicing of cash flows
• Examples: strips, CMOs, dual
purpose funds, principal/interest splits
Trang 10• Globalization continues and offers more opportunities
• Securitization continues to develop
• Continued development of derivatives and exotics
• Strong fundamental foundation is critical
• Integration of investments & corporate