Lecture 1; Introduction to investment
- 1. Investment and Portfolio analysis SHAHEED BENAZIR BHUTTO UNIVERSITY, PAKISTAN Course Instructor Dr. Muhammad Wajid Raza Assistant Professor at Shaheed Benazir Bhutto University Dir Pakistan Email; wajidrazauom@sbbu.edu.pk Youtube Channel; excelwithsham Course: Investment and Portfolio Analysis
- 2. What is investment and portfolio analysis? 2 ‛The course title is composed of two words 1. Portfolio 2. Investment Investment is a process in which we allocate our funds to profitable projects and we expect future returns from out investment decisions. ‛ SHAHEED BENAZIR BHUTTO UNIVERSITY PAKISTAN Investment involves decisions about future. We save or borrow money and then allocate our funds to projects which can generate future profits.
- 3. What is investment? 3 SHAHEED BENAZIR BHUTTO UNIVERSITY PAKISTAN Save money Borrow money Current time period “t” Holding period Receive returns Future time period “t+1” Reinvest your returns Lets visualize the process We have to consider many factors in every investment decision. For example, risk preferences, level of expected returns, macroeconomic conditions, time period of investment, time value of money and opportunity cost. We will discuss these factors in detail in coming classes
- 4. So… where can we invest 4 We can allocate our funds to different options to reap reward for example Invest opportunities Reward Give loans Interest Real Estate Value appreciation Shares Dividend, Capital gain We can start new business Profit on sales Value appreciation Purchasing of gold Promised future benefits Purchase of insurance plan
- 5. What is a portfolio ‛Portfolio: The word portfolio means combination of any thing. ‛It can be combination/collection of your favorite movies ‛It can be combination/collection of favorite dresses and so on. ‛In financial terminology we can define portfolio as: The combination of financial securities and other assets in such a way that can increase the level of expected returns at a given level of risk or minimize the level of risk at a given level of returns. ‛So we can invest our money in different combination of assets, ranging from gold or real estate to complex financial instruments, i.e., bonds, shares, futures, options, crypto-currency and so on…. Please read the work of Henry Markowitz about portfolio investment. Its one of the pioneering work about portfolio investment and investors preferences 5
- 6. 6 Importance of investment? • Circulation of funds • Safeguard time value of money • Provide future returns • Provide job opportunities • Reduce income inequality • Help in economic development • Upgrade living standards • Help in executing idea in to practice
- 7. 7 What if we don’t invest? First, If we do not invest, we can’t earn anything on cash Second, the purchasing power of cash diminishes because of inflation This means that if savers do not invest their savings, they will not only lose possible return on their savings, but will also lose value of their money due to inflation. Finally, we will not play our role in the overall development of our economy.
- 8. ‛Thank you so much…. ‛If you have any questions feel free to contact me on my email address, wajidrazauom@sbbu.edu.pk ‛Or watch the video lecture on excelwithsham and comment there. 8