Introduction to Investment
Security analysis is a pre-requisite for making investments. In the present day financial markets, investment has become complicated. One makes investments for a return higher than what he can get by keeping the money in a commercial or cooperative bank or even in an investment bank.
In the finance field, it is common knowledge that money or finance is scarce and that investors try to maximize their return. But the finance theory states that the return is higher if the risk is also higher. Return and risk go together and they have a trade-off. Most of the investments are risky to some degree.
The art of investment is to see that the return is maximized with the minimum of risk, which is inherent in investments. If the investor keeps his money in a bank in a savings account, he takes the least risk, as the money is safe and he will get back when he wants it. But he runs the risk that the return in real terms, adjusted for inflation is negative or small and even if positive, it may not come up to his expectations or needs.
In the above discussion, we concentrated on the word ‘Investment’. But for making the investment, we need to make security analysis. It then becomes necessary to define properly investment and security analysis at the outset.
In the finance field, it is common knowledge that money or finance is scarce and that investors try to maximize their return. But the finance theory states that the return is higher if the risk is also higher. Return and risk go together and they have a trade-off. Most of the investments are risky to some degree.
The art of investment is to see that the return is maximized with the minimum of risk, which is inherent in investments. If the investor keeps his money in a bank in a savings account, he takes the least risk, as the money is safe and he will get back when he wants it. But he runs the risk that the return in real terms, adjusted for inflation is negative or small and even if positive, it may not come up to his expectations or needs.
In the above discussion, we concentrated on the word ‘Investment’. But for making the investment, we need to make security analysis. It then becomes necessary to define properly investment and security analysis at the outset.
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