A study and understanding of the investment environment would be of importance to the investor. In addition, the more experience he has gained in dealing in and with the various components of this environment, the better prepared he would be to face the various situations he would come across during the investment time horizon.
While we dwell on the investment environment, we shall discuss the following aspects:
INTRODUCTION TO THE INVESTMENT ENVIRONMENT: To study the investment environment would be of importance to the investor, as it would also encompass the demand supply match and mismatch.
INVESTMENT AVENUES: There are a large number of investment instruments available today. To make our lives easier we would classify or group them under 4 main types of investment avenues. We shall name and briefly describe them.
INVESTMENT ATTRIBUTES: To enable the evaluation and a reasonable comparison of various investment avenues, the investor should study the following attributes; namely, the rate of return, risk, marketability, taxes and convenience.
COMPARISON OF INVESTMENT AVENUES: across various financial securities and instruments ranging from equity (or stocks) to bank deposits to provident fund through to mutual funds and real assets (like real estate and gold/silver).
INVESTMENT DECISION MAKING: APPROACHES: As investors we would have diverse investment strategies with the primary aim to achieve superior performance, which would also mean a higher rate of return on our investments. All investment strategies can be broadly classified under 4 approaches, which are explained.
COMMON ERRORS IN INVESTMENT MANAGEMENT: In any endeavor we undertake, we are sometimes right and make correct decisions and sometimes we are wrong and prone to errors. We are prone to these errors, when we do not have a correct perspective of the environment or lack a correct assessment of the current situation in the environment.
INVESTMENT AND SPECULATION: There is a very thin and blurred line between investing and speculating (or gambling). To have a clearer understanding of this, we would differentiate between the two.
INVESTMENT WISDOM: ONE LINERS: Listed here are wisdom one liners which would give an investor an insight to what he or she is up against.
THE SECURITIES MARKET: The term securities markets enclose a number of markets in which securities can be bought and sold.
UNDERSTANDING INVESTMENT BANKS: As investors seeking a better understanding of the investment environment it would be appropriate to understand the composition, structure and various functions associated with investment banks; as they are amongst the important participants of the global financial markets.
THE BROKER: As investors we are not able to deal with the market directly. It would be like entering and trying to find our way through an unending maze. The markets on their part, are too large, to attend to every single investor directly. This would be a Herculean task and a management nightmare for it. So, the markets introduce and authorize the middleman to act on its behalf. This middleman is also called the “Broker”.
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