Investment Market and its operation

Let’s learn more about Investment Market and its operation.

Investment Environment

The term investment refers to the exchange of money wealth into some tangible wealth. The money wealth here refers to the money (saving) which an investor has and the term tangible wealth refers to the assets the investor acquires by sacrificing the money wealth. By investing, an investor commits the present funds to one or more assets to be held for some time in expectation of some future return in terms of interest of capital gain.

Investments can be defined as a commitment of funds that are expected to generate additional money.

Investment Process

The term investment process is used to refer to the decision-making process employed by an investor to decide what assets to invest in and when to make an investment.

Basic features common to all types of Investment

The three basic features which can be identified as common to all types of investments are:

There is a commitment of present funds
There is an expectation of some return or benefits from such commitment in the future.
There is always some risk involved in respect of return and the principal amount invested.

Steps involved in an investment process

The term investment process is used to refer to the decision-making process employed by an investor to decide what assets to invest in and when to make an investment. It includes the following steps:

Setting the investor’s objective for investment and the amount of wealth that he wants to invest.
Analysis of different asset securities to identify those which are suitable for investment.
Constructing a portfolio of investments and determining the proportion of wealth to be invested in each one.
Periodic repetition of the above three steps to revise and improve the portfolio in view of changing situations. Thus may entail the evaluation to the performance of the portfolio in terms of the risk and return of the portfolio.