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INTRODUCTION TO INVESTMENT MANAGEMENT

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The questions to be answered first are:
What is investment?
What is investment management? and
Where does the money come from?

Investment is putting aside and employing money in financial instruments in the present, with the expectation of a positive rate of return in the future. Putting it briefly, investment is a sacrifice in the present in the expectation of a future gain.

By extension, Investment management is the art of administering the employment of money in financial instruments in the present, with the expectation of a positive rate of return in the future. These individual financial instruments are kept in a case called the portfolio.

 

Now where does the money come from? At an individual level, a person does a job of work and earns an income comprising of pay and perks. Here money is the medium of exchange.

The person would sensibly use his income in the following fashion:

1. Provide for current living expenses (or consumption).
2. Provide for personal requirements and deferred expenses.
3. Savings:

a) To provide for emergency requirements.

b) Revitalize: Employ for gainful returns in the future (or invest).

 
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