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INVESTMENT MANAGEMENT ASSIGNMENT:1

Q.1) what is Investment Environment? Explain in etail !riteria "orInvestment #e!ission?

ANS$ INVESTMENT ENVI%&NMENT

CHAPTER NO.1.

WHAT IS INVESTMENT: Investment has different meanings in finane and e!n!mis. In e!n!mis"

investment is the a#m#$ati!n !f ne%$& 'r!d#ed 'h&sia$ entities" s#h as fat!ries" mahiner&" h!#ses"

and g!!ds invent!ries. In finane" investment is '#tting m!ne& int! an asset %ith the e('etati!n !fa'ita$ a''reiati!n" dividends" and)!r interest earnings. This ma& !r ma& n!t *e *a+ed *& researh and

ana$&sis. M!st !r a$$ f!rms !f investment inv!$ve s!me f!rm !f ris+" s#h as investment in e,#ities"

'r!'ert&" and even fi(ed interest se#rities %hih are s#*-et" am!ng !ther things" t! inf$ati!n ris+. In

e!n!mi the!r& !r in mar!e!n!mis" n!nresidentia$ fi(ed investment is the am!#nt '#rhased 'er

#nit time !f g!!ds %hih are n!t !ns#med *#t are t! *e #sed f!r f#t#re 'r!d#ti!n /i.e. a'ita$0.

E(am'$es in$#de rai$r!ad !r fat!r& !nstr#ti!n. Investment inh#man a'ita$ in$#des !sts !f

additi!na$ sh!!$ing !r !nthe-!* training. Invent!r& investment is the a#m#$ati!n !f g!!ds

invent!ries it an *e '!sitive !r negative" and it an *e intended !r #nintended.

In meas#res !f nati!na$ in!me and !#t'#t" 2gr!ss investment2 / re'resented *& the varia*$e I 0 is a

!m'!nent !f gr!ss d!mesti 'r!d#t /34P0" given in the f!rm#$a 34P 5 C 6 I 6 3 6N7" %here C is

!ns#m'ti!n" 3 is g!vernment s'ending" and N7 is net e('!rts" given *& the differene *et%een the

e('!rts and im'!rts" 7 8 M. Th#s investment is ever&thing that remains !f t!ta$ e('endit#re after

!ns#m'ti!n" g!vernment s'ending" and net e('!rts are s#*trated /i.e. I 5 34P 8 C 8 3 8 N70. N!n

residentia$ fi(ed investment /s#h as ne% fat!ries0 and residentia$ investment /ne% h!#ses0 !m*ine

%ith invent!r& investment t! ma+e #' I. 2Net investment2

INVESTMENT ENVIRONMENT ded#ts de'reiati!n fr!m gr!ss investment. Net fi(ed investment

is the va$#e !f the net inrease in the a'ita$ st!+ 'er &ear. 9i(ed investment" as e('endit#re !ver a

'eri!d !f time /e.g." 2'er &ear20" is n!t a'ita$ *#t rather $eads t! hanges in the am!#nt !f a'ita$. The

time dimensi!n !f investment ma+es it a f$!%. & !ntrast" a'ita$ is a st!+; that is" a#m#$ated net

investment t! a '!int in time /s#h as 4eem*er

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in!me and interest rates" given *& the re$ati!n I 5 f/=" r0. An inrease in in!me en!#rages higher

investment" %hereas a higher interest rate ma& dis!#rage investment as it *e!mes m!re !st$& t!

*!rr!% m!ne&. Even if a firm h!!ses t! #se its !%n f#nds in an investment" the interest rate re'resents

an !''!rt#nit& !st !f investing th!se f#nds rather than $ending !#t that am!#nt !f m!ne& f!r interest. In

finane" investment is the '#rhase !f an asset !r item %ith the h!'e that it %i$$ generate in!me !r

a''reiate in the f#t#re and *e s!$d at the higher 'rie. It genera$$& d!es n!t in$#de de'!sits %ith a *an+

!r simi$ar instit#ti!n. The term investment is #s#a$$& #sed %hen referring t! a $!ngterm !#t$!!+. This is

the !''!site !f trading !r s'e#$ati!n" %hih are sh!rtterm 'raties inv!$ving a m#h higher degree !f

ris+. 9inania$ assets ta+e man& f!rms and an range fr!m the #$tra safe $!% ret#rn g!vernment *!nds t!

m#h higher ris+ higher re%ard internati!na$ st!+s. A g!!d investment strateg& %i$$ diversif& the

'!rtf!$i! a!rding t! the s'eified needs. The m!st fam!#s and s#essf#$ invest!r !f a$$ time is Warren

#ffett. In Marh >?1< 9!r*es maga@ine had Warren #ffett ran+ed as n#m*er > in their 9!r*es ?? $ist.

#ffett has advised in n#mer!#s arti$es and intervie%s that a g!!d investment strateg& is $!ng term and

h!!sing the right assets t! invest in re,#ires d#e di$igene. Ed%ard O. Th!r' %as a ver& s#essf#$

hedge.

INVESTMENT ENVIRONMENT f#nd manager in the 1B?s and 1BD?s that s'!+e !f a simi$ar

a''r!ah. An!ther thing the& *!th have in !mm!n is a simi$ar a''r!ah t! managing investment m!ne&.

N! matter h!% s#essf#$ the f#ndamenta$ 'i+ is" %ith!#t a 'r!'er m!ne& management strateg&" f#$$

'!tentia$ !f the asset ant *e reahed. !th invest!rs have *een sh!%n t! #se 'rini'$es fr!m the Fe$$&

riteri!n f!r m!ne& management. N#mer!#s interative a$#$at!rs %hih #se the +e$$& riteri!n an *e

f!#nd !n$ine. In !ntrast" d!$$ar /!r '!#nd et.0 !st averaging and mar+et timing are 'hrases !ften #sed

in mar+eting !f !$$etive investments and an *e said t! *e ass!iated %ith s'e#$ati!n. Investments are

!ften made indiret$& thr!#gh intermediaries" s#h as 'ensi!n f#nds" *an+s" *r!+ers" and ins#rane

!m'anies. These instit#ti!ns ma& '!!$ m!ne& reeived fr!m a $arge n#m*er !f individ#a$s int! f#nds

s#h as investment tr#sts" #nit tr#sts" SICAVs et. t! ma+e $arge sa$e investments. Eah individ#a$

invest!r then has an indiret !r diret $aim !n the assets '#rhased" s#*-et t! harges $evied *& the

intermediar&" %hih ma& *e $arge and varied. It genera$$&" d!es n!t in$#de de'!sits %ith a *an+ !r simi$ar

instit#ti!n. Investment #s#a$$& inv!$ves diversifiati!n !f assets in !rder t! av!id #nneessar& and

#n'r!d#tive ris+.

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'%ITE%IA (&% INVESTMENT #E'ISI&NS AN# %IS MANAGEMENT

Th!#gh it is a+n!%$edged t! *e ris+&" investing in !r'!rate se#rities is n!% !nsidered t! *e !ne !f the

genera$$& ae'ted !'ti!ns !f savings management. A $arge h#n+ !f the savings !f the !#ntr& finds its

%a& t! the st!+: mar+ets. Investment in !r'!rate se#rities !ffers in!me in the f!rm !f dividend andinterest a$!ng %ith a'ita$ a''reiati!n. G#dii!#s$& made investment in shares !ffers $i,#idit& a$s!.

Investing" h!%ever" entai$s ris+s" *#t it an *e m!derated *& rati!na$ and 'r#dent investment deisi!ns.

Ris+ management has *e!me im'erative f!r investment management. In India" the #rrent g$!!m&

!r'!rate senari! and the e(treme$& v!$ati$e a'ita$ mar+ets have *r!#ght ris+ management t! the !re !f

investment deisi!ns. The m!re ast#te and $ever invest!rs an ta+e the right investment deisi!ns t!

'r!d#e the e(tra re%ard. In this ha'ter" an attem't is made t! ana$&se the riteria f!r investment

deisi!ns and h!% the& are he$'f#$ in !#ntering and red#ing ris+s.

The strength !f the manage

Investment 'riteria

#e"inition $ *hat oesInvestment Criteriamean?

Investment riteria are the defined set !f 'arameters #sed *& finania$ and strategi *#&ers t!

assess an a,#isiti!n target. S!'histiated *#&ers %i$$ #s#a$$& have t%! sets !f riteria:

The 'arameters that are dis$!sed '#*$i$& t! intermediaries s#h as investment *an+ers"

s! the& +n!% %hat the *#&er is $!!+ing f!r in !rder t! s!#re dea$s that fit and

The 'arameters deve$!'ed f!r interna$ revie% that a$$!% a *#&er t! ,#i+$& determine if

the a,#isiti!n sh!#$d *e '#rs#ed f#rther.

The m!st !mm!n '#*$i$& dis$!sed investment riteria in$#de the ge!gra'h&" si@e !f the

investment !r !m'an& targeted" and ind#str&. S!me *#&ers a$s! dis$!se riteria regarding the

investment t&'e %hih ma& in$#de management *#&!#ts /MO0" distressed !''!rt#nities" !r

s#essi!n sit#ati!ns.

Investment riteria are #sed *& *#&ers t! ,#i+$& assess a,#isiti!n !''!rt#nities. The& ma+e

the 'r!ess !f s!#ring and ,#a$if&ing ne% !''!rt#nities m!re effiient. 9!r e(am'$e" 'rivate

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e,#it& firms ma& $!!+ at >? !m'anies *ef!re $!sing !ne investment" s! having $ear$&

esta*$ished investment riteria reates f!#s and ,#i+$& e$iminates dea$s that d! n!t fit the *#&er

and)!r the se$$er.

The 'rimar& '#r'!se !f the riteria dis$!sed t! the genera$ '#*$i is t! gather as m#h dea$ f$!%

as '!ssi*$e. One the detai$s !f the !''!rt#nit& are gathered" the interna$ investment riteria %i$$

*e a''$ied t! determine if an e('ressi!n !f interest /EOI0 !r $etter !f intent /OI0 sh!#$d *e

iss#ed. S!me!mm!n interna$ investment riteria in$#de:

ment team+

the estimate I%% on the investment+

',stomer iversi"i!ation+ an

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Q .- ) *%ITE &N (&&*ING #ETAIS

/a) T0pes o" Investors :

There are '$ent& !f st!ries a*!#t 'e!'$e 2*!!tstra''ing2 start#'s %ith their !%n m!ne&. ThatJs

n!t a$%a&s '!ssi*$e. Man& start#'s !me t! the '!int %here the& have t! de'end !n invest!rs.

When d!ing s!" itJs im'!rtant t! +n!% the different t&'es !f invest!rs. The m!st !mm!n t&'es

are:

an+s

Ange$ invest!rs

Peert!'eer $enders

Vent#re a'ita$ists

Pers!na$ invest!rs

Regard$ess !f %hih invest!r &!# h!!se" get it in %riting %ith f!rms fr!m !#r*#siness enter.

an2s

A *an+ $!an ma& *e avai$a*$e t! he$' &!# %ith start#' !sts. A *an+ %i$$ %ant t! see a

detai$ed*#siness '$anand a th!r!#gh desri'ti!n !f &!#r *#siness and its 'r!s'ets. A*#siness

'r!'!sa$ d!#menta$s! states the 'r!d#t !r servies *eing !ffered" &!#r finania$ and

management 'r!-eti!ns" and h!% &!# '$an t! im'$ement &!#r g!a$s.

ItJs easiest t! get a $!an %hen &!# g! t! a *an+ %ith %hih &!# a$read& have a re$ati!nshi'. e

're'ared t! 'r!ve finania$ res'!nsi*i$it& and %ait the time it ma& ta+e t! 'r!ess the $!an.

Che+ int! see+ing a $!an *a+ed *& the Sma$$ #siness Administrati!n. The SA sets

g#ide$ines f!r its 'artnersin$#ding $enders" !mm#nit& deve$!'ment !rgani@ati!ns and

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mir!$ending instit#ti!nst! f!$$!%. It g#arantees that the $!ans %i$$ *e re'aid" adding s!me

$everage t! he$' the $ender deide %hether t! $!an &!# the m!ne&.

'ers!na$ e('eriene in the ind#str& !r a g!!d ment!r %h! is %e$$ versed in the ind#str&. =!# ma&

a$s! have t! ta$+ !$$atera$" in$#ding '!ssi*$& a h!me e,#it& $!an" and 'r!vide as m#h start#'ash as &!# an.

An3el Investors

There are ange$s !n &!#r side %hen it !mes t! see+ing !#tside finaning. This t&'e !f invest!r

is t&'ia$$& an entre'rene#r %h! has en!#gh %ea$th t! he$' !thers. Ange$ invest!rs invest in

*#sinesses in %hih the& *e$ieve *#t the& rea$i@e ma& str#gg$e t! find !ther finaning.

An ange$ invest!r ma& *#& st!+ fr!m a !m'an& !r ma+e a $!an. S!me serve as ment!rs andadvis!rs. S!me ma& s'eia$i@e" s#h as highteh ange$s %h! 'refer he$'ing t! *ring ne%

tehn!$!g& t! the mar+et'$ae and ma& !r ma& n!t %ant t! ative$& 'artii'ate in the !m'an&.

An!ther t&'e is a ret#rn !n investment ange$" %h! e('ets t! see a finania$ 'a&*a+ fr!m a

highris+ investment. Ret#rn !n investment ange$s are m!re $i+e$& t! invest %hen the e!n!m& is

sta*$e !r im'r!ving. The& ma& n!t %ant t! *e inv!$ved 'ast investing *#t are !ften h!'ef#$ that

the& %i$$ get a h#ge 'a&!ff if the !m'an& g!es '#*$i !r gets '#rhased *& a *igger !r'!rati!n.

C!nsiderati!ns %hen a''r!ahing ange$ invest!rs in$#de:

H!% m#h !ntr!$ d!es the invest!r e('etK

H!% m#h !ntr!$ are &!# %i$$ing t! shareK

What is the invest!rJs m!tivati!nK

H!% e('eriened is the invest!rK

4!es &!#r vent#re meet the invest!rJs investment re,#irementsK

A 'r!miss!r& n!te s'e$$s !#t the re'a&ment terms !f the $!an. We !ffer a 'r!miss!r& $!an

d!#menttem'$ate f!r free.

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4eer$to$4eer enin3

We$!me t! starting a *#siness in the highteh %!r$d !f t!da&. Peert!'eer $ending $ets 'e!'$e

$ist 'r!-ets !n$ine f!r !nsiderati!n *& '!tentia$ invest!rs. This t&'e !f invest!r *rings the

start#' and sma$$ *#siness !%ners t!gether %ith entre'rene#rs %i$$ing t! he$' and invest.

Pr!s'erand ending C$#*are am!ng %e*sites that s'eia$i@e in 'eert!'eer !r P>P $ending.

2We #t !#t the midd$eman t! !nnet 'e!'$e %h! need m!ne& %ith th!se %h! have m!ne& t!

invest"2 Pr!s'er states !n its %e*site.

Peert!'eer $ending ste's" shared *& the Sma$$ #siness Administrati!n" in$#de:

Have a '$an. Ma+e s#re t! in$#de %hat &!# find !#t fr!m mar+et researh" !m'etitive

ana$&sis" finania$ f!reasts" e('eted ret#rns and m!re.

Te$$ &!#r st!r&. Te$$ %hat &!# h!'e t! ahieve and %hat &!#r *a+gr!#nd is.

Share &!#r ahievements and 'r!gress. asia$$&" se$$ &!#rse$f and &!#r *#siness. H!%

m#h have &!# invested &!#rse$f and at %hat stage is &!#r *#sinessK What mi$est!nes have

&!# reahedK =!# %ant t! 'r!ve t! '!tentia$ invest!rs that &!#r *#siness is !n the 'ath t!

s#ess. 3!ing 'eert!'eer $ending ma& #t !#t the midd$eman" *#t n!t finania$ !mm!n

sense !n the 'art !f invest!rs.

=!#r redit hist!r& '$a&s a 'art in %hether &!# an engage in 'eert!'eer $ending. =!# grant

aess t! &!#r redit s!re %hen &!# a''$& f!r a 'eert!'eer $!an. This t&'e !f invest!r ma&

re,#ire &!# t! im'r!ve &!#r redit hist!r& *ef!re finding &!# $!an%!rth&.

If engaging in 'eert!'eer $ending" ma+e s#re &!# #nderstand the terms !f &!#r $!an and ma+e

'a&ments !n time. 9a$$ing *ehind an inrease &!#r fees and 'revent &!# fr!m see+ing an!ther

'eert!'eer $!an.

Che+ in &!#r state t! see if there are an& s'eifi reg#$ati!ns !nerning 'eert!'eer $ending.

O#r On Ca$$ $ega$ serviean he$' &!# find a $!a$ att!rne& %ith that +n!%$edge.

Vent,re 'apitalists

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One &!#Jve 'r!ven &!#rse$f a *it m!re" itJs time t! !nsider vent#re a'ita$ists. This t&'e !f

invest!r e('et &!# t! sh!% &!# have a s!$id*#siness '$an. A vent#re a'ita$ist a$s! %ants t! see

a high ret#rn !f 'r!fit.

Vent#re a'ita$ists ma& invest as m#h as mi$$i!ns !f d!$$ars. The& %i$$ invest the m!ne& neededt! he$' that ha''en. The& d! that *& se#ring e,#it& a'ita$" !r a share in &!#r !m'an&. The&

are *etting that the share %i$$ *e %!rth m!re %ithin time and %i$$ %ait t! get a ret#rn !n the

investment.

3iving #' that e,#it& a'ita$ means giving #' s!me !%nershi' !r sa& in the !m'an&. Vent#re

a'ita$ists ma& a$s! %ant a stee'er ret#rn !n their investment than %hat the interest rate ma& *e

!n a *#siness $!an.

C!nsider having a$$ 'arties sign a $imited 'artnershi' agreementt! s'e$$ !#t the rights and d#ties

!f eah 'artner.

4ersonal Investors

=!#r friends and fami$& ma& *e %i$$ing t! $end &!# the ash t! start a *#siness" and &!# ma& *e

%i$$ing t! ta+e it. #t thin+ t%ie *ef!re heading in this direti!n.

Mi(ing *#siness %ith fami$& is ris+ing" *ringing *#siness dis'#tes t! fami$& gatherings and !ther

events. =!# ris+ h#rting n!t !n$& &!#r finanes *#t a$s! a re$ativeJs !r friendJs if the *#siness

d!esnJt ta+e !ff as %e$$ as &!# antii'ate. There are st!ries a*!#t 'e!'$e s#essf#$$& h!!sing

this !'ti!n" *#t *ef!re &!# d!" ma+e s#re &!#r fami$& ties are str!ng en!#gh t! %ithstand the

'ress#res !f d!ing *#siness. Have eah 'art& sign a 'r!miss!r& n!te that s'e$$s !#t the

re'a&ment terms !r" if &!# are 'artnering %ith a friend !r fami$& mem*er" sign a'artnershi'

agreement.

These are the different t&'es !f invest!rs that ma& he$' &!# $a#nh &!#r dream !m'an&.

Remem*er" eah sit#ati!n is different" and ta+e $ega$ 'rea#ti!ns *ef!re reahing !#t t! an&

invest!r. O#r On Ca$$ att!rne& serviean math &!# #' %ith a $a%&er %e$$ versed in *#siness

$a%.

(b) Investor Objectives

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On ?)?)>?1?" InInvest!r Pr!fi$es"& G!rdan Wi$s!n

Previ!#s$& %e !nsidered h!% !nes ris+ t!$eraneand the 'hase in !nes$ife &$esh!#$d

im'at eah individ#a$s investment strateg&.

It is a$s! ver& im'!rtant t! assess &!#r #ni,#e investment !*-etives and !nstraints.

T!da& %e %i$$ $!!+ at !nes investment !*-etives.

There are five se'arate ateg!ries !f invest!r g!a$s !r !*-etives. Whi$e a$$ individ#a$s share

these !mm!n ateg!ries" the s'eSifi !*-etives %ithin eah %i$$ *e #ni,#e t! eah 'ers!n.

Emer3en!0 (,ns

A$th!#gh n!t rea$$& an investment g!a$" it sh!#$d *e an !*-etive t! maintain en!#gh $i,#idit& t!

dea$ %ith an& emergenies that ma& arise.

I s#ggest that &!# h!$d a''r!(imate$&

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As the time t! the g!a$ is $!se" &!# %ant t! inrease the ertaint& !f the investments ret#rn. =!#

sh!#$d invest in $!% ris+" sta*$e investments that 'r!vide a re$ative$& +n!%n res#$t.

Cash !r ash e,#iva$ents %!#$d fa$$ int! this area. Sh!rt term *!nds ma& a$s! *e #sef#$

investments. In ertain sit#ati!ns" !ther f#nds ma& a$s! *e a''r!'riate.

It is im'!rtant t! tr& and math the mat#rit& !f &!#r asset t! the e('eted date !f the e('endit#re.

on3$Term 5i3h 4riorit0

This ateg!r& ref$ets ritia$ !*-etives %h!se time h!ri@!n is a $!ng %a&s !ff.

An e(am'$e %!#$d *e in ahieving finania$ inde'endene at age L. An!ther might *e t! *#& a

$a+e h!#se !r a %inter !nd! in 9$!rida *& the time &!# are ?.

ea#se !f the $!ng time frame" &!# have the a*i$it& t! ride !#t the #'s and d!%ns !f high$&

v!$ati$e investments. This a$$!%s &!# t! invest in assets that have re$ative$& high ris+ and greater

e('eted ret#rns.

The $!nger time frame a$s! a$$!%s &!# t! invest in $ess $i,#id assets. If &!# are #rrent$&

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As the !*-etive is $ess im'!rtant t! the individ#a$" the invest!r ma& invest in e(treme$& high ris+

assets in the h!'e !f a*n!rma$ ret#rns. If it is s#essf#$" great. If #ns#essf#$ and f#nds are n!t

avai$a*$e t! meet the g!a$" its $a+ !f attainment %as n!t ritia$.

Entreprene,rial

This ateg!r& inv!$ves entre'rene#ria$ !r m!ne&ma+ing vent#res and !vers an& time frame.

P!rtf!$i! diversifiati!n is #s#a$$& n!t an iss#e in this ateg!r&. Instead" invest!rs tend t! ta+e an

a$$ eggs in !ne *as+et vie% t! their entre'rene#ria$ ativities.

As &!# an e('et" this is n!rma$$& a high ris+ investment %ith the '!tentia$ f!r high re%ards /!r

t!ta$ $!ss0.

That s#ms #' the ateg!ries !f invest!r !*-etives.

In f#t#re" as &!# deve$!' finania$ g!a$s" tr& t! determine %hih $assifiati!n eah !ne fits int!.

Then" deve$!' a''r!'riate investment strategies and tatis t! attain eah g!a$.

(c) investing vs speculating

| The main differene *et%een s'e#$atingand investing is the am!#nt !f !f ris+ #nderta+en

in the trade. T&'ia$$&" highris+ trades that are a$m!st a+in t! gam*$ing fa$$ #nder the #m*re$$a

!f s'e#$ati!n" %hereas $!%erris+ investments *ased !n f#ndamenta$s and ana$&sis fa$$ int! the

ateg!r& !f investing. Invest!rs see+ t! generate a satisfat!r& ret#rn !n their a'ita$ *& ta+ing !n

an average !r *e$!%average am!#nt !f ris+. On the !ther hand" s'e#$at!rs are see+ing t! ma+e

a*n!rma$$& high ret#rns fr!m *ets that an g! !ne %a& !r the !ther. It sh!#$d *e n!ted that

s'e#$ati!n is n!t e(at$& $i+e gam*$ing *ea#se s'e#$at!rs d! tr& t! ma+e an ed#ated deisi!n

!n the direti!n !f the trade" *#t the ris+ inherent in the trade tends t! *e signifiant$& a*!ve

average.

As an e(am'$e !f a s'e#$ative trade" !nsider av!$ati$e-#ni!r g!$d mining !m'an& that has an

e,#a$ hane !ver the near term !f s+&r!+eting fr!m a ne% g!$d mine dis!ver& !r g!ing

*an+r#'t. With n! ne%s fr!m the !m'an&" invest!rs %!#$d tend t! sh& a%a& fr!m s#h a ris+&

trade" *#t s!me s'e#$at!rs ma& *e$ieve that the -#ni!r g!$d mining !m'an& is g!ing t! stri+e

g!$d and ma& *#& its st!+ !n a h#nh. This %!#$d *e s'e#$ati!n.

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(d) Investing vs speculating

The main differene *et%eens'e#$atingand investing is the am!#nt !f !f ris+ #nderta+en in

the trade. T&'ia$$&" highris+ trades that are a$m!st a+in t! gam*$ing fa$$ #nder the #m*re$$a !f

s'e#$ati!n" %hereas $!%erris+ investments *ased !n f#ndamenta$s and ana$&sis fa$$ int! the

ateg!r& !f investing. Invest!rs see+ t! generate a satisfat!r& ret#rn !n their a'ita$ *& ta+ing !n

an average !r *e$!%average am!#nt !f ris+. On the !ther hand" s'e#$at!rs are see+ing t! ma+e

a*n!rma$$& high ret#rns fr!m *ets that an g! !ne %a& !r the !ther. It sh!#$d *e n!ted that

s'e#$ati!n is n!t e(at$& $i+e gam*$ing *ea#se s'e#$at!rs d! tr& t! ma+e an ed#ated deisi!n

!n the direti!n !f the trade" *#t the ris+ inherent in the trade tends t! *e signifiant$& a*!ve

average.

As an e(am'$e !f a s'e#$ative trade" !nsider av!$ati$e-#ni!r g!$d mining !m'an& that has an

e,#a$ hane !ver the near term !f s+&r!+eting fr!m a ne% g!$d mine dis!ver& !r g!ing

*an+r#'t. With n! ne%s fr!m the !m'an&" invest!rs %!#$d tend t! sh& a%a& fr!m s#h a ris+&

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trade" *#t s!me s'e#$at!rs ma& *e$ieve that the -#ni!r g!$d mining !m'an& is g!ing t! stri+e

g!$d and ma& *#& its st!+ !n a h#nh. This %!#$d *e s'e#$ati!n.

As an e(am'$e !f investing" !nsider a $arge sta*$e m#$tinati!na$ !m'an&. The !m'an& ma&

'a& a !nsistent dividend that inreases ann#a$$&" and its *#siness ris+ is $!%. An invest!r ma&h!!se t! invest in this !m'an& !ver the $!ngterm t! ma+e a satisfat!r& ret#rn !n his !r her

a'ita$ %hi$e ta+ing !n re$ative$& $!% ris+. Additi!na$$&" the invest!r ma& add severa$ simi$ar

!m'anies ar!ss different ind#stries t! his !r her '!rtf!$i! t! diversif&and f#rther $!%er their

ris+.

Q6) what are the investment aven,e are availa7le to the investor? #is!,ss the

"a!tor in"l,en!in3 sele!tion o" investment alternatives?

Ans- Diferent Avenues o Invest!ents

In the m!dern finania$ s&stem there are s! man& investment #aven#es t! h!!se fr!m

t!da& in finania$ mar+et and it has *e!me diffi#$t f!r an&!ne t! deide a*!#t these aven#es.

S!me !f these investment aven#es !ffer attrative ret#rns *#t %ith high ris+s and s!me !ffer

$!%er ret#rns %ith ver& $!% ris+s. An !vera$$ ana$&sis !f these investment aven#es %ith ris+ and

ret#rn trade is 'resented in this arti$e. These investment aven#es are:

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E8,it0:E,#it& is an investment aven#e %hih is a*$e t! !ffer the highest '!ssi*$e ret#rns *#t is

ver& ris+& as there are h#ge 'r!*a*i$ities !f invest!rs even $!sing s!me 'art !f the invested

a'ita$ t!!. This an !ffer ret#rns in range !f 1 ? ann#a$$& in g!!d times and negative

ret#rns !f 1 a$s!.

M,t,al (,ns:M#t#a$ f#nds!ffer m!derate ret#rns *#t are $ess ris+& !m'ared t! e,#it&

investments. The& an !ffer a ret#rn *et%een 1>

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%eal Estate:One an a$s! invest in rea$ estate. This investment !ffers attrative ret#rn. #t the

'rie f$#t#ati!n in *ad times ver& high. And !ne needs $a+hs !f r#'ees t! get started in this

mar+et.

Govt. an %I ons:These !ffer fi( rate !f ret#rn !ver 'eri!d !f time.

'ompan0 ons:These are same as g!vt. *!nds. On$& differene is that these are m!re ris+&.

4ost &""i!e Investments:These are the ris+ free investments. And !ffer $!%er ret#rn.

Ins,ran!e:Ins#ranehave *e!me !ne !f the m!st im'!rtant investment aven#es in India. nit

in+ed Ins#rane P$ans are ver& '!'#$ar in India *esides the traditi!na$ end!%ment '!$iies.

Pr!vident 9#nds: This !ne !f the safest $!ng term investment !'ti!n. This is main$&

f!r retirement '#r'!se.

There are s! man& !ther !'ti!ns avai$a*$e s#h as ar*!n trading" #rren& trading" '!%er

trading and s! man&. One sh!#$d h!!se investment aven#es a!rding t! her)his finania$ g!a$

and +n!%$edge a*!#t the finania$ instr#ments.

=!#r vie%s matter a $!t f!r a hea$th& dis#ssi!n.

"#ctors t$#t #fect t$e se%ection o Invest A%tern#tives

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Investment o7e!tives

The '#r'!se !f the investment m#st *e made $ear *ef!re the se$eti!n fr!m avai$a*$e

a$ternatives. 3enera$$& m!st investments are #nderta+en t! 'r!vide an inrease in %ea$th. The

higher the $eve$ !f desired %ea$th" the higher the ret#rn that m#st *e reeived. An invest!r

see+ing higher ret#rns m#st *e %i$$ing t! fae higher $eve$ !f ris+. The investment '#r'!se ma&

different a!rding t! time and $ife age !f a 'ers!n.

%ate o" ret,rn

The *asi 'rini'$e !f investment is t! se#re ma(im#m ret#rn %ith minim#m ris+. The e('eted

rate !f ret#rn fr!m an investment a$ternative sh!#$d *e a#rate. Sine it is a f!reast" there is

#s#a$$& s!me varia*i$it& a*!#t the 'reise am!#nt !f the ret#rn. If the e('eted rate !f ret#rn is

n!t a#rate then the invest!r ma& divert !r hange his investment in !ther a$ternatives.

%is2

Ris+ is the varia*i$it& !f '!ssi*$e ret#rns ar!#nd the e('eted ret#rn !f an investment. Eah

invest!r has his)her !%n attit#de a*!#t ris+ and h!% m#h he !r she an t!$erate. Sine

investments !f ris+ ass!iated %ith them" the invest!r m#st determine %hih" !m*inati!n

a$ternatives math his !r her 'arti#$ar ris+ t!$eranes.

Taxes

3!vernment ta( '!$i& is a$s! a determining fat!r %hi$e h!!sing am!ng investment

a$ternatives. It a$s! de'ends #'!n the 'ere'ti!n !f different invest!rs that s!me ma& *e

interested in ta( e(em't asset %hi$e !thers ma& *e interested in high &ie$ding *#t ta(a*$e

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ret#rning assets. The invest!rs sh!#$d a$s! !nsider a*!#t ta( $a%s that 'r!vide man& ded#ti!ns

in the !ns#m'ti!n !f ta(a*$e in!me.

Investment hori;on

Investment 'eri!d is a$s! a fat!r t! determine the investment a$ternatives. The ret#rn !n

investment is affeted *& the investment 'eri!d. It affets n!t !n$& the ret#rn and ris+ *#t a$s!

fre,#ent$& the ta( !nse,#enes ass!iated %ith the ret#rn.

Investment strate3ies

Whi$e se$eting an investment a$ternatives investment strategies sh!#$d a$s! *e !nsidered *& an

invest!r. Investment strateg& in$#des three e$ements.

Investment selection

nder this e$ements t%! 'r!ed#res sh!#$d *e !m'$eted:

Identif&ing a''r!'riate investment a$ternatives !r ateg!ries.

Se$eting individ#a$ se#rities !r assets in eah ateg!r&.

Investment timing

An!ther im'!rtant e$ement %hi$e h!!sing an investment a$ternative is timing. It refers t!

'#rhasing an asset -#st *ef!re it is $i+e$& t! inrease in va$#e and se$$ing the asset -#st *ef!re it

is $i+e$& derease in va$#e.

#iversi"i!ation$Investment ris+ an *e red#ed *& maintaining a '!rtf!$i! !r *& in$#ding m!re

than !ne a$ternative !r ateg!r&.

A&&I'*+, O2

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.1) +%e!ent t$e !e#nin/ o is tes o ris sste!#ti/ #n

unsste!#tic ivision #n v#ri#nces

ANSMEANING AN# #E(INATI&N &( %IS

The hane that an investmentJs at#a$ret#rn%i$$ *e different than e('eted. Ris+ in$#des the

'!ssi*i$it& !f $!sing s!me !r a$$ !f the !rigina$ investment. 4ifferent versi!ns !f ris+ are #s#a$$&

meas#red *& a$#$ating the standard deviati!n!f thehist!ria$ ret#rns!r average ret#rns!f a

s'eifi investment. A high standard deviati!n indiates a high degree !f ris+.

Man& !m'anies n!% a$$!ate $arge am!#nts !f m!ne& and time in deve$!'ing ris+

managementstrategies t! he$' manage ris+s ass!iated %ith their *#siness and investment

dea$ings. A +e& !m'!nent !f the ris+ mangement 'r!ess isris+ assessment" %hih inv!$ves the

determinati!n !f the ris+s s#rr!#nding a *#siness !r investment.

,es o iss

N!% that %eJve !vered the +e& tas+s !f ris+ management %e need t! #nderstand that there are

different t&'es !f ris+s %hih have different im'ats and theref!re need t! *e treated different$&.The f!$$!%ing $ist !vers 'rett& m#h ever& ris+ &!# an thin+ !f" f!rt#nate$& the& d!nJt a$%a&s

a''$&. 9!r e(am'$e" if &!# have *een %!r+ing %ith the same team in the same !ffie f!r man&

&ears the team envir!nment ris+s %!nJt a''$&. #t itJs g!!d t! *e a%are !f a$$ !f the t&'es !f

ris+s as it he$'s t! #nderstand a$$ the things that an g! %r!ng. It might seem a *it !ver%he$ming

t! !nsider things fr!m s#h a negative '!int !f vie% *#t thatJs %hat ris+ management is a*!#t"

itJs tr&ing t! %!r+ !#t %hat a$$ the 'r!*$ems are s! that &!# an av!id them !r manage them

effetive$&. A $a+ !f ris+ management is %hat $eads t! the high fai$#re rates !f 'r!-ets.

ItJs im'!rtant t! #nderstand that ris+s arenJt -#st defined t! the 'r!-et" the& a$s! a''$& t! the

*#siness" the s#''$iers" the 'e!'$e %!r+ing !n the 'r!-et as %e$$ as the s&stem and 'e!'$e that

have t! s#''!rt and #se the 'r!-et. There are a $!t !f ang$es t! !nsider" s!me !f %hih %!nJt

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matter" s!me !f %hih %i$$ *e signifiant and need ati!n. These an a$$ *e a't#red #nder the

f!$$!%ing five ateg!ries.

Pr!-et Ris+

#siness Ris+

Pr!d#ti!n S&stem Ris+

enefits Rea$isati!n Ris+

Pers!na$ Ris+

4roe!t %is2

P#t sim'$&" 'r!-et ris+s are fat!rs that !#$d a#se the 'r!-et t! fai$. The& are the m!st

signifiant !f the ris+ t&'es and has a n#m*er !f s#* t&'es that need t! *e !nsidered" these are

S&stem !r 'r!d#t !m'$e(it&

C$ient !r target envir!nment

Team envir!nment

#siness 'r!-et ris+

S0stem 'omplexit0

This is a*!#t h!% *ig and !m'$e( the 'r!-et is eg.

The n#m*er !f feat#res

The v!$#me !f !ntent

The $eve$s !f %!r+f$!% re,#ired

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The $eve$s !f 'ermissi!ns re,#ired

The $arit& !f the re,#irements

The e('eted v!$#me !f traffi

The e('eted n#m*er !f #sers

The e('eted res'!nse times

Eah !f these fat!rs an im'at !n the 'r!-et and %hat t&'e !f ris+s the& are s#*-et t!. 9!r

e(am'$e" a site %ith n! %!r+f$!% *#t a $arge v!$#me !f !ntent and high traffi %!#$d need t!

!nsider 'erf!rmane as a ma-!r e$ement %heras a sma$$er site that has an e!mmere

!m'!nent %!#$d have se#rit& as a high ris+ fat!r.

Tar3et Environment

This is a*!#t %here the end s!$#ti!n %i$$ *e #sed and the nat#re !f the #sers. Eg.

The $eve$ !f internet aess

The +n!%$edge $eve$ !f the #sers

P#*$i !r interna$ s&stem

The $eve$ !f interati!n %ith the s&stem re,#ired

The ,#a$it& !f the e,#i'ment *eing #sed" sreen res!$#ti!n)'$#gins re,#iredet

The degree !f 'r!-et s'!ns!r *#&in and s#''!rt

The im'at !f the s!$#ti!n !n the 'e!'$e #sing it

These da&s" internet a''$iati!ns are *eing #sed m!re and m!re *!th interna$$& and e(terna$$&

theref!re an have a signifiant im'at !n the *#siness if the& fai$.

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Team Environment

This %!#$d have t! *e !ne !f the m!st im'!rtant ris+ t&'es. The team ma+es a h#ge differene t!

the s#ess !f a 'r!-et. If &!# have a %e$$ f#nti!ning e('eriened team" itJs a h#ge advantage.

This ris+ t&'e needs aref#$ !nsiderati!n. It an ma+e !r *rea+ a 'r!-et. The main fat!rs t!

!nsider are

Is the time$ine fi(ed !r f$e(i*$e

Has the team %!r+ed t!gether *ef!reK

Is the team e('eriened %ith e@ '#*$ishK

Wi$$ the team sta& !nsistent thr!#gh!#t the 'r!-etK

Wi$$ !#tside !ntrat!rs *e re,#iredK

Is the team %!r+ing t!getherK

Is it a '!sitive %!r+ envir!nment

4!es the team have the e,#i'ment the& needK

A ne% team %ith!#t e('eriene is a rei'e f!r disaster. An&!ne ne% t! a tehn!$!g& %i$$ have a

$earning #rve that %i$$ inrease the $ength !f the 'r!-et and im'at !n the ,#a$it& !f the

!#t!me.

,siness 4roe!t %is2

A$!ng %ith the !vera$$ s&stem !m'$e(it& thereJs a$s! the *#siness 'r!-et ris+ %hih is simi$ar

*#t n!t the same. It is a*!#t the *#siness as'et !f the 'r!-et" n!t the end res#$t. If the 'r!-et is

m!ving int! a ne% area that hasnJt *een tried !r tested" the ris+ is greater as thereJs n! indiati!n

!f h!% itJs g!ing t! *e ae'ted !r if it %i$$ ahieve the g!a$s itJs s#''!sed t!. ThereJs a *ig

differene in re'$aing a stati %e*site %ith !ne *#i$t %ith a CMS as a''!sed t! a %e*

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a''$iati!n t! *e #sed t! 'r!vide !n$ine ,#!tes f!r ins#rane 'r!d#ts. The fat!rs t! $!!+ f!r in

*#siness 'r!-et ris+s are:

The intrinsi !m'$e(it& !f the *#siness 'r!d#t

The $eve$ !f inn!vati!n

The sta*i$it& !f re,#irements

The re,#ired $eve$ !f ,#a$it&

The $eve$ !f !m'$iane t! 'r!esses !r $egis$ati!n

9!r a *#siness" a !m'$e( 'r!-et has a higher hane !f fai$ing as hange %ithin *#sinesses an

*e diffi#$t t! intr!d#e. If the $eve$ !f inn!vati!n is high" there is a$s! a ris+ as %e are dea$ing

%ith s!mething ne% and #n+n!%n that might n!t %!r+ as e('eted. If %e have t! !m'i$e %ith

ertain $ega$ riteria %e e('!se the *#siness t! $ega$ ati!n if its n!t d!ne 'r!'er$&.

,siness ris2

WeJve $!!+ed at the t&'es !f ris+s that an a#se the 'r!-et t! fai$ *#t thereJs an!ther $eve$ t!

!nsider" %hat ha''ens t! the *#siness if the 'r!-et fai$sK In s!me ases" eg. re*#i$ding an

intranet" the im'at %!nJt *e signifiant if the #rrent intranet +ee's %!r+ing *#t if the 'r!-et is

the s!$e interfae the *#siness has t! itJs $ients" the im'at !#$d a#se the *#siness t! g! #nder.

What &!# %ant t! $!!+ f!r in this t&'e !f ris+ is %hat e('!s#re the *#siness %i$$ fae if the

'r!-et fai$s.

9r!m the finania$ 'ers'etive the *#siness an $!!se m!ne& !n the 'r!-et if the *enefits arent

de$ivered. Strategia$$& if the 'r!-et fai$s it an mean the *#siness misses an !''!rt#nit& t! *e

first t! mar+et %ith a ne% servie !ffering. If the site fai$s t! !m'i$e %ith $ega$ re,#irements" the

*#siness !#$d *e e('!sed t! $ega$ ati!n. If the site isnt se#re en!#gh it an e('!se the

*#siness t! finania$ $!ss. If the site fai$s t! 'erf!rm and +ee's g!ing !ff$ine" the image and

re'#tati!n !f the *#siness an *e affeted.

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4ro,!tion S0stem %is2

The *#siness ase f!r 'r!-ets !ften fai$s t! !nsider the !ng!ing !st !f the s!$#ti!n.

A sim'$e e(am'$e is the need f!r server m!nit!ring and se#rit& 'athes. A *etter e(am'$e is theris+ faed *& n!t #'grading t! the $atest versi!n !f an a''$iati!n !ne the versi!n &!#Jre #sing is

n! $!nger s#''!rted. #t the *est e(am'$e is the training and s#''!rt re,#ired f!r 'e!'$e #sing

the s&stem and an& hanges that might *e needed. 9r!m the $ientJs 'ers'etive" IJve f!#nd that

thereJs e(itement and enth#siasm t! get the s!$#ti!n #' and r#nning *#t %hen it !mes t!

maintenane" it d!esnJt seem ,#ite as im'!rtant. One its #' and r#nning" 'e!'$e m!ve !n t!

!ther 'r!-ets and s!!n f!rget a*!#t s!$#ti!n the& -#s de$ivered. G#st $i+e a ar" a %e* a''$iati!n

needs reg#$ar serviing and t#ning. Ign!ring this an $ead t! 'erf!rmane iss#es if the site is n!t

m!nit!red and maintained. .

The things t! $!!+ f!r are

The 'r!visi!n f!r s#''!rt and maintenane

The e('eriene !f the 'r!d#ti!n s#''!rt team mem*ers

The age !f the 'r!d#ti!n s&stem and versi!ns !f s!ft%are

The $eve$ !f s#''!rting d!#mentati!n and training.

The higher the ris+ !f the 'r!d#ti!n s&stem" the m!re $i+e$& the s&stem %i$$ fai$ and ta+e $!nger

/!r m!re eff!rt h!#rs0 t! fi(. 9!r s!me %e* a''$iati!ns" !#tages $itera$$& !st the *#siness

m!ne& s! if attenti!n isnJt 'aid" the $ient %i$$ end #' 'a&ing !ne %a& !r an!ther.

ene"its %ealisation %is2

A$th!#gh itJs !ften f!rg!tten !ne a 'r!-et is #nder%a& !r has *een de$ivered" there is a$%a&s a

reas!n f!r the 'r!-et in the first '$ae. The reas!n a *#siness #nderta+es a 'r!-et is t! rea$ise

*enefits in !ne %a& !r an!ther" %hether it *e inrease in sa$es !r im'r!ving effiien&. ItJs a$$ t!!

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eas& t! get a#ght #' in the detai$s !f the 'r!-et and f!rget the *igger 'it#re" es'eia$$& %hen

&!#Jre str#gg$ing t! get !ntent and de$iver the 'r!-et !n time.

What needs t! *e !nsidered is h!% rea$isti it is that the *#siness %i$$ get the *enefits the& h!'e

t! ahieve the fat!rs t! !nsider in$#de:

The n#m*er !f different sta+eh!$ders" $ients and e(terna$ 'artners inv!$ved

The need f!r #$t#re hanges ) training ) ae'tane !f the ne% s!$#ti!n

The degree !f management *#&in

The timeframe f!r *enefits rea$isati!n and

The si@e !f the *enefits t! *e rea$i@ed.

The m!re sta+eh!$ders there are" the m!re 'e!'$e that %i$$ have in'#t and need t! *e !ns#$ted

!n deisi!ns s$!%$& the 'r!ess d!%n. If there is a need f!r hanges t! the %a& the *#siness r#n"

theres a hane 'e!'$e %i$$ re-et the ne% 'r!ess in fav!#r !f the tried and tr#sted meth!d. If

there isnt en!#gh time t! rea$i@e the *enefits !f the s!$#ti!n" it might *e !nsidered a fai$#re. If

the e('etati!ns are the s!$#ti!n %i$$ s!$ve $!ts !f 'r!*$ems there %i$$ *e greater 'ress#re t! get

things right.

4ersonal %is2

This is a$s! !ften f!rg!tten" es'eia$$& *& management /#n$ess &!# are management0. What is it

g!ing t! mean t! &!# !r &!#r team if this 'r!-et fai$sK N! d!#*t this is s!mething that is g!ing

t! *e in the *a+ !f &!#r mind and itJs im'!rtant t! *ring this t! the s#rfae s! that management

!r &!#r $ient is a%are !f the sit#ati!n. And this is a seri!#s t&'e !f ris+" 'e!'$e an get h#rt"

finania$$& *& $!!sing a -!* !r their hea$th an s#ffer d#e t! stress n!t t! menti!n '!tentia$ $ega$

e('!s#re. The 'ress#res !f %!r+ an have an im'at !n 'h&sia$ and menta$ hea$th n!t t!

menti!n 'r!fessi!na$ and 'ers!na$ re$ati!nshi's. S!me 'e!'$e #nder t!! m#h 'ress#re %i$$

$itera$$& *rea+ d!%n. Is an& 'r!-et %!rth thatK

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,$is ris is not just on t$e roject *#n#/er #%t$ou/$ t$e #re t$e !ost %ie%

t#r/et or stress It c#n #fect everone on t$e roject I t$e roject *#n#/er

is un#b%e to ne/oti#te :it$ t$e c%ient (be in #n intern#% or e;tern#% roject)

#n t$e e#%ine c#n

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the mar+et as a %h!$e. In !ther %!rds" *eta gives a sense !f a st!+Js mar+et ris+ !m'ared t! the

greater mar+et. eta is a$s! #sed t! !m'are a st!+Js mar+et ris+ t! that !f !ther st!+s.

Investment ana$&sts #se the 3ree+ $etter JUJ t! re'resent *eta. eta is #sed in the a'ita$ asset

'riing m!de$/CAPM0" as %e desri*ed in the 'revi!#s seti!n.

eta is a$#$ated #singregressi!nana$&sis" and &!# an thin+ !f *eta as the tenden& !f a

se#rit&Js ret#rns t! res'!nd t! s%ings in the mar+et. A *eta !f 1 indiates that the se#rit&Js 'rie

%i$$ m!ve %ith the mar+et. A *eta !f $ess than 1 means that the se#rit& %i$$ *e $ess v!$ati$e than

the mar+et. A *eta !f greater than 1 indiates that the se#rit&Js 'rie %i$$ *e m!re v!$ati$e than

the mar+et. 9!r e(am'$e" if a st!+Js *eta is 1.>" itJs the!retia$$& >? m!re v!$ati$e than the

mar+et.

Man& #ti$it& st!+s have a *eta !f $ess than 1. C!nverse$&" m!st hightehNasda,*ased st!+s

have a *eta greater than 1" !ffering the '!ssi*i$it& !f a higher rate !f ret#rn" *#t a$s! '!sing m!re

ris+.

eta he$'s #s t! #nderstand the !ne'ts !f 'assive and ative ris+. The gra'h *e$!% sh!%s a

time series !f ret#rns /eah data '!int $a*e$ed 2620 f!r a 'arti#$ar '!rtf!$i! R/'0 vers#s the

mar+et ret#rn R/m0. The ret#rns are ashad-#sted" s! the '!int at %hih the ( and & a(es

interset is the ashe,#iva$ent ret#rn. 4ra%ing a $ine !f *est fit thr!#gh the data '!ints a$$!%s #s

t! ,#antif& the 'assive" !r *eta" ris+ and the ative ris+" %hih %e refer t! as a$'ha.

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The gradient !f the $ine is its *eta. 9!r e(am'$e" a gradient !f 1.? indiates that f!r ever& #nit

inrease !f mar+et ret#rn" the '!rtf!$i! ret#rn a$s! inreases *& !ne #nit. A manager em'$!&ing a

'assive management strateg& an attem't t! inrease the '!rtf!$i! ret#rn *& ta+ing !n m!re

mar+et ris+ /i.e." a *eta greater than 10 !r a$ternative$& derease '!rtf!$i! ris+ /and ret#rn0 *&

red#ing the '!rtf!$i! *eta *e$!% 1. Essentia$$&" *eta e('resses the f#ndamenta$ trade!ff*et%een

minimi@ing ris+ and ma(imi@ing ret#rn. etJs give an i$$#strati!n. Sa& a !m'an& has a *eta !f >.

This means it is t%! times as v!$ati$e as the !vera$$ mar+et. etJs sa& %e e('et the mar+et t!

'r!vide a ret#rn !f 1? !n an investment. We %!#$d e('et the !m'an& t! ret#rn >?. On the

!ther hand" if the mar+et %ere t! de$ine and 'r!vide a ret#rn !f L" invest!rs in that !m'an&

!#$d e('et a ret#rn !f 1> /a $!ss !f 1>0. If a st!+ had a *eta !f ?." %e %!#$d e('et it t!

*e ha$f as v!$ati$e as the mar+et: a mar+et ret#rn !f 1? %!#$d mean a gain f!r the !m'an&.

Invest!rs e('eting the mar+et t! *e*#$$ishma& h!!se f#nds e(hi*iting high *etas" %hih

inrease invest!rsJ hanes !f *eating the mar+et. If an invest!r e('ets the mar+et t!

*e*earishin the near f#t#re" the f#nds that have *etas $ess than 1 are a g!!d h!ie *ea#se the&

%!#$d *e e('eted t! de$ine $ess in va$#e than the inde(. 9!r e(am'$e" if a f#nd had a *eta !f

?. and the SQP ?? de$ined L" the f#nd %!#$d *e e('eted t! de$ine !n$&

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Beta of 1 A *eta !f 1 re'resents the v!$ati$it& !f the given inde(#sed t! re'resent the

!vera$$ mar+et against %hih !ther st!+s and their *etas are meas#red. The SQP ??is

s#h an inde(. If a st!+ has a *eta !f 1" it %i$$ m!ve the same am!#nt and direti!n as

the inde(. S!" an inde( f#nd that mirr!rs the SQP ?? %i$$ have a *eta $!se t! 1.

Beta greater than 1 This den!tes a v!$ati$it& that is greater than the *r!ad*ased inde(.

Man& tehn!$!g& !m'anies !n the Nasda, have a *eta higher than 1.

Beta greater than 100 This is im'!ssi*$e as it essentia$$& den!tes a v!$ati$it& that is 1??

times greater than the mar+et. If a st!+ had a *eta !f 1??" it %!#$d *e e('eted t! g! t! ?

!n an& de$ine in the st!+ mar+et. If &!# ever see a *eta !f !ver 1?? !n a researh site" it

is #s#a$$& either the res#$t !f a statistia$ err!r !r a sign that the given st!+ hase('eriened $arge s%ings d#e t! $!% $i,#idit&" s#h as an !verthe!#nterst!+

.2) An#%ses t$e #t# #n !#e t$e istin/us$# bet:een st#ner

evi#tion #n v#ri#nce

D#t# #n#%si

Anal0sis o" atais a 'r!ess !f ins'eting" $eaning" transf!rming" and m!de$ing data%ith the

g!a$ !f dis!vering #sef#$inf!rmati!n" s#ggesting !n$#si!ns" and s#''!rting deisi!nma+ing.

4ata ana$&sis has m#$ti'$e faets and a''r!ahes" en!m'assing diverse tehni,#es #nder a

variet& !f names" in different *#siness" siene" and s!ia$ siene d!mains.

4ata mining is a 'arti#$ar data ana$&sis tehni,#e that f!#ses !n m!de$ing and +n!%$edge

dis!ver& f!r 'reditive rather than '#re$& desri'tive '#r'!ses.#siness inte$$igene!vers

data ana$&sis that re$ies heavi$& !n aggregati!n" f!#sing !n *#siness inf!rmati!n. In statistia$

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a''$iati!ns" s!me 'e!'$e divide data ana$&sis int! desri'tive statistis" e('$!rat!r& data

ana$&sis/E4A0" and!nfirmat!r& data ana$&sis/C4A0. E4A f!#ses !n dis!vering ne%

feat#res in the data and C4A !n !nfirming !r fa$sif&ing e(isting h&'!theses.Preditive

ana$&tisf!#ses !n a''$iati!n !f statistia$ m!de$s f!r 'reditive f!reasting !r $assifiati!n"

%hi$ete(t ana$&tisa''$ies statistia$" $ing#isti" and str#t#ra$ tehni,#es t! e(trat and $assif&

inf!rmati!n fr!m te(t#a$ s!#res" a s'eies !f #nstr#t#red data. A$$ are varieties !f data

ana$&sis.

4ata integrati!n is a 're#rs!r t! data ana$&sis" and data ana$&sis is $!se$& $in+ed t! data

vis#a$i@ati!nand data disseminati!n. The term data analysisis s!metimes #sed as a s&n!n&m

f!r data m!de$ing.

,$e rocess o #t# #n#%sis

Ana$&sis refers t! *rea+ing a %h!$e int! its se'arate !m'!nents f!r individ#a$ e(aminati!n.

4ata ana$&sis is a'r!essf!r !*taining ra% data and !nverting it int! inf!rmati!n #sef#$ f!r

deisi!nma+ing *& #sers. 4ata is !$$eted and ana$&@ed t! ans%er ,#esti!ns" test h&'!theses !r

dis'r!ve the!ries.1

Statistiian G!hn T#+e&defined data ana$&sis in 1BL1 as: 2Pr!ed#res f!r ana$&@ing data"

tehni,#es f!r inter'reting the res#$ts !f s#h 'r!ed#res" %a&s !f '$anning the gathering !f data

t! ma+e its ana$&sis easier" m!re 'reise !r m!re a#rate" and a$$ the mahiner& and res#$ts !f

/mathematia$0 statistis %hih a''$& t! ana$&@ing data.2>

There are severa$ 'hases that an *e disting#ished" desri*ed *e$!%. The 'hases are iterative" in

that feed*a+ fr!m $ater 'hases ma& res#$t in additi!na$ %!r+ in ear$ier 'hases.

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ma& *e s'eified and !*tained. 4ata ma& *e n#meria$ !r ateg!ria$ /i.e." a te(t $a*e$ f!r

n#m*ers0.

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Moelin3 an al3orithms

Mathematia$ f!rm#$as !r m!de$s a$$eda$g!rithmsma& *e a''$ied t! the data t! identif& re$ati!nshi's am!ng

the varia*$es" s#h as !rre$ati!n!ra#sati!n. In genera$ terms" m!de$s ma& *e deve$!'ed t! eva$#ate a

'arti#$ar varia*$e in the data *ased !n !ther varia*$e/s0 in the data" %ith s!me resid#a$ err!r de'ending !nm!de$ a#ra& /i.e." 4ata 5 M!de$ 6 Err!r0. 1

Inferentia$ statistisin$#des tehni,#es t! meas#re re$ati!nshi's *et%een 'arti#$ar varia*$es. 9!r

e(am'$e" regressi!n ana$&sisma& *e #sed t! m!de$ %hether a hange in advertising /inde'endent varia*$e 70

e('$ains the variati!n in sa$es /de'endent varia*$e =0. In mathematia$ terms" = /sa$es0 is a f#nti!n !f 7

/advertising0. It ma& *e desri*ed as = 5 a7 6 * 6 err!r" %here the m!de$ is designed s#h that a and *

minimi@e the err!r %hen the m!de$ 'redits = f!r a given range !f va$#es !f 7. Ana$&sts ma& attem't t! *#i$d

m!de$s that are desri'tive !f the data t! sim'$if& ana$&sis and !mm#niate res#$ts.1

#ata pro,!t

A data 'r!d#t is a !m'#ter a''$iati!n that ta+es data in'#ts and generates !#t'#ts" feeding them *a+ int!

the envir!nment. It ma& *e *ased !n a m!de$ !r a$g!rithm. An e(am'$e is an a''$iati!n that ana$&@es data

a*!#t #st!mer '#rhasing hist!r& and re!mmends !ther '#rhases the #st!mer might en-!&.

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Standard deviati!nand variane" th!#gh *asi mathematia$ !ne'ts" '$a& im'!rtant

r!$es in man& areas !f the finania$ set!r" in$#ding a!#nting" e!n!mis and

investing. In investing" f!r e(am'$e" a firm gras' !f the a$#$ati!n and inter'retati!n !f

these t%! meas#rements is r#ia$ f!r the reati!n !f an effetive trade strateg&.

!th standard deviati!n and varianeare derived fr!m the mean !f a given data set.

Whereas the mean is sim'$& the average !f a$$ data '!ints" the variane meas#res the

average degree t! %hih eah '!int differs fr!m the mean. The greater the variane" the

$arger the !vera$$ data range. 9!r the variane" first a$#$ate the differene *et%een eah

'!int and the mean. The res#$ts are s,#ared and averaged t! 'r!d#e the variane. 9!r

sim'$iit&Js sa+e" this e(am'$e #ses a data set !nsisting !f the n#m*ers *et%een 1 and

1?" giving a mean !f .. S,#aring the differene *et%een eah data '!int and the mean

and averaging the s,#ares renders a variane !f D.>.

Standard deviati!n is sim'$& the s,#are r!!t !f the variane. The a$#$ati!n !f variane

#ses s,#ares *ea#se it %eights !#t$iers m!re heavi$& than data ver& near the mean. This

a$s! 'revents differenes a*!ve the mean fr!m ane$ing !#t th!se *e$!%" %hih an

s!metimes res#$t in a variane !f @er!. H!%ever" *ea#se !f this s,#aring" the variane is

n! $!nger in the same #nit !f meas#rement as the !rigina$ data. Ta+ing the r!!t !f the

variane means the standard deviati!n is rest!red t! the !rigina$ #nit !f meas#re. 9!r

traders and ana$&sts" these t%! !ne'ts are !f 'aram!#nt im'!rtane as the standard

deviati!n is #sed t! meas#re mar+et v!$ati$it&" %hih in t#rn '$a&s a $arge r!$e in reating

a 'r!fita*$e trade strateg&.

Trae i2e a Top 5e3e (,n

What an tehnia$ traders see that &!# d!ntK Invest!'edia 'resents9ive Chart Patterns

=!# Need t! Fn!%" &!#r g#ide t! tehnia$ trading $i+e the 'r!s. C$i+ heret! get started"

and $earn h!% t! read harts $i+e an ind#str& veteran.

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.3) :$#t is orto%io #n e;ercise t$e e;ecte return o

orto%io

eturn is - +;ecte eturn >#ri#nce An &t#n#r Devi#tion

O A orto%io

E('eted ret#rnis a$#$ated as the %eighted average !f the $i+e$& 'r!fits !f the assets in the

'!rtf!$i!" %eighted *& the $i+e$& 'r!fits !f eah asset $ass. E('eted ret#rn is a$#$ated *&

#sing the f!$$!%ing f!rm#$a:

Written an!ther %a&" the same f!rm#$a is as f!$$!%s: E/R0 5 %1R16 %>R,6 ...6 %nRn

Example: Expected Return

9!r a sim'$e '!rtf!$i! !f t%! m#t#a$ f#nds" !ne investing in st!+sand the !ther in*!nds"if %e

e('et the st!+ f#nd t! ret#rn 1? and the *!nd f#nd t! ret#rn L and !#r a$$!ati!n is ? t!eah asset $ass" %e have the f!$$!%ing:

E('eted ret#rn /'!rtf!$i!0 5 /?.10Y/?.0 6 /?.?L0Y/?.0 5 ?.?D" !r D

E('eted ret#rn is *& n! means a g#aranteed rate !f ret#rn. H!%ever" it an *e #sed t! f!reast

the f#t#re va$#e !f a '!rtf!$i!" and it a$s! 'r!vides a g#ide fr!m %hih t! meas#re at#a$ ret#rns.

etJs $!!+ at an!ther e(am'$e. Ass#me an investment managerhas reated a '!rtf!$i! %ith St!+

A and St!+ . St!+ A has an e('eted ret#rn !f >? and a %eight !f

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E/R0 5 /?.

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1 ?.1 /1L.? 1.>0 5 1.D

> ?.

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/%eight/10\>Yvariane/10 6 %eight/>0\>Yvariane/>0 6 >Y%eight/10Y%eight/>0Y!variane/1">0

Here is the f!rm#$a stated an!ther %a&:

P!rtf!$i! Variane 5 %>AYZ>/RA0 6 %>YZ>/R0 6

>Y/%A0Y/%0YC!v/RA" R0

Where: wAand wB are portfolio weights, !"#A$ and

!"#B$

are varian%es and

&ov"#A, #B$ is the %ovarian%e

Example: !ortfolio ariance

4ata !n *!th variane and !variane ma& *e dis'$a&ed in a !variane matri(. Ass#me the

f!$$!%ing !variane matri( f!r !#r t%!asset ase:

Sto!2 on

St!+ AYZ>/RA0 6 %>YZ>/R0 6 >Y/%A0Y/%0YC!v/RA" R0 5/?.0>Y/Y/1?0 6 >Y/?.0Y/?.0Y/D?0 5 D. 6

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1. A meas#re !f the dis'ersi!n !f a set !f data fr!m its mean. The m!re s'read a'art the data" the

higher the deviati!n. Standard deviati!n is a$#$ated as the s,#are r!!t !f variane.

>. In finane" standard deviati!n is a''$ied t! the ann#a$ rate !f ret#rn !f an investment t!

meas#re the investmentJs v!$ati$it&. Standard deviati!n is a$s! +n!%n as hist!ria$ v!$ati$it&and

is #sed *& invest!rs as a ga#ge f!r the am!#nt !f e('eted v!$ati$it&.

Standard deviati!n is a statistia$ meas#rement that sheds $ight !n hist!ria$ v!$ati$it&. 9!r

e(am'$e" a v!$ati$e st!+ %i$$ have a high standard deviati!n %hi$e a sta*$e*$#e hi'st!+ %i$$

have a $!%er standard deviati!n. A $arge dis'ersi!n te$$s #s h!% m#h the f#ndJs ret#rn is

deviating fr!m the e('eted n!rma$ ret#rns.

Example: "tandard #eviation

Standard deviati!n /Z0 is f!#nd *& ta+ing the s,#are r!!t !f variane:

/1L01)> 5 1>.D.

We #sed a t%!asset '!rtf!$i! t! i$$#strate this 'rini'$e" *#t m!st '!rtf!$i!s !ntain far m!re

than t%! assets. The f!rm#$a f!r variane *e!mes m!re !m'$iated f!r m#$tiasset '!rtf!$i!s.

A$$ terms in a !variane matri( need t! *e added t! the a$#$ati!n.

etJs $!!+ at a se!nd e(am'$e that '#ts the !ne'ts !f variane and standard deviati!n t!gether.

.4) :o%%o:in/rite on t$e o%%o:in/

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(#)orto%io iss -

One !f the !ne'ts #sed in ris+ and ret#rn a$#$ati!ns is standard deviati!n" %hih

meas#res the dis'ersi!n !f at#a$ ret#rns ar!#nd the e('eted ret#rn !f an investment. Sine

standard deviati!n is the s,#are r!!t !f the variane" variane is an!ther r#ia$ !ne't t! +n!%.

The variane is a$#$ated *& %eighting eah '!ssi*$e dis'ersi!n *& its re$ative 'r!*a*i$it& /ta+e

the differene *et%een the at#a$ ret#rn and the e('eted ret#rn" then s,#are the n#m*er0.

The standard deviati!n !f an investmentJs e('eted ret#rn is !nsidered a *asi meas#re !f ris+.

If t%! '!tentia$ investments had the same e('eted ret#rn" the !ne %ith the $!%er standard

deviati!n %!#$d *e !nsidered t! have $ess '!tentia$ ris+.

%is2 meas,res

There are three !ther ris+ meas#res #sed t! 'redit v!$ati$it& and ret#rn:

eta$ This meas#res st!+ 'rie v!$ati$it& *ased s!$e$& !n genera$ mar+et m!vements.

T&'ia$$&" the mar+et as a %h!$e is assigned a *eta !f 1.?. S!" a st!+ !r a '!rtf!$i! %ith a

*eta higher than 1.? is 'redited t! have a higher ris+ and" '!tentia$$&" a higher ret#rn

than the mar+et. C!nverse$&" if a st!+ /!r f#nd0 had a *eta !f .D" this %!#$d indiate that

if the mar+et inreased *& 1?" this st!+ /!r f#nd0 %!#$d $i+e$& ret#rn !n$& D..

H!%ever" if the mar+et dr!''ed 1?" this st!+ %!#$d $i+e$& dr!' !n$& D..

earn h!% t! 'r!'er$& #se this meas#re t! he$' &!# meet &!#r riteria f!r ris+ %ithin the

arti$eBeta: 'auging (ri%e )lu%tuations.

A$'ha$This meas#res st!+ 'rie v!$ati$it& *ased !n the s'eifi harateristis !f the

'arti#$ar se#rit&. As %ith *eta" the higher the n#m*er" the higher the ris+.

Alpha >$%sum of &' ( %%b'%sum of x'')*n

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*here:

n > n,m7er o" o7servations /6 months)

7 > 7eta o" the ",n

x > rate o" ret,rn "or the mar2et

0 > rate o" ret,rn "or the ",n

An a$'ha !f 1.? means the f#nd !#t'erf!rmed the mar+et 1.

Shar'e rati!$ This is a m!re !m'$e( meas#re that #ses the standard deviati!n !f a st!+

!r '!rtf!$i! t! meas#re v!$ati$it&. This a$#$ati!n meas#res the inrementa$ re%ard !f

ass#ming inrementa$ ris+. The $arger the Shar'e rati!" the greater the '!tentia$ ret#rn.

Shar'e Rati! 5 /t!ta$ ret#rn ris+ free rate !f ret#rn0

*oo+ ut-

The reverse !f 2the $arger the Shar'e rati!" the greater the ret#rn2 a$s! h!$ds tr#e. The 2$!%er the

Shar'e rati!" the $!%er the '!tentia$ ret#rn2. If a se#rit&]Js Shar'e rati! %ere e,#a$ t! 2?2" there

%!#$d *e n! re%ard f!r ta+ing !n the higher ris+" and the invest!r %!#$d *e *etter !ff sim'$&

h!$ding Treas#ries /%h!se ret#rn is e,#a$ t! the ris+free ret#rn !m'!nent !f the e,#ati!n0.

/7) %e,!tion o" port"olio ris2 thro,3h iversi"i!ation Strate3ies

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#iversi"0 @o,r 4ort"olio *ith 'ommoities

Want t! $earnH!% t! Invest In C!mm!ditiesK Invest!'edias 9REE C!mm!dities Trading ne%s$etter

gives &!# the insights &!# need t! 'r!fit fr!m nat#ra$ res!#res. C$i+ heret! *egin tra+ing the

!mm!dit& mar+et $i+e an e('ert t!da&

Red#ing Ris+ thr!#gh 4iversifiati!n

=!#Jre '$anning a visit t! San 9ranis!. What d! &!# 'a+K S#ntan $!ti!n !r an #m*re$$aK =!#

d! a $itt$e researh. =!# he+ the %eather f!reast. #t even th!#gh the 'rediti!n a$$s f!r

s#nshine and %arm tem'erat#res" &!# *ring a$!ng the #m*re$$a and rain gear -#st in ase. =!#r

s#itase ma& *e heavier" *#t &!#J$$ *e 're'ared" rain !r shine

This 'rini'$e !f !vering &!#r *ases h!$ds tr#e %ith &!#r investment '!rtf!$i!" as %e$$. M!st

invest!rs av!id '#tting a$$ !f their m!ne& int! !ne investment. T!! ris+&. A %e$$*a$aned

'!rtf!$i! %i$$ !nsist !f different asset $asses and a variet& !f investments %ithin eah asset

$ass. ThatJs diversifiati!n.

Smooth o,t the ,ps an owns

Sine different investments tend t! rise and fa$$ in va$#e at different times and f!r different

reas!ns" diversifiati!n an he$' sm!!th !#t the inevita*$e #'s and d!%ns !f the mar+ets.

4iversifiati!n a$s! he$'s t! red#e ris+. & distri*#ting &!#r m!ne& ar!ss different asset

$asses and investments" &!# red#e the ris+ !f *eing h#rt *& '!!r 'erf!rmane in an& !ne

'arti#$ar investment.

=!# might *e %!ndering h!% high are the 'ea+s and h!% $!% are the va$$e&s if &!# %ere n!t t!

diversif& *#t invest in e($#sive$& !ne asset $ass. The hart *e$!% i$$#strates h!% the asset

$asses have f$#t#ated and the average ret#rn !ver the $ast

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genera$$& !nsidered re'resentative !f the .S. st!+ mar+et. !nds are re'resented *& the

ar$a&s Aggregate inde(" a *r!ad *ased inde( maintained *& ar$a&s Ca'ita$ !ften #sed t!

re'resent high grade g!vernment and !r'!rate S *!nds. Sh!rtTerm Investments are

re'resented *& a !m'!site !f the &ie$ds !f

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#sed *& a f#ndJs '!rtf!$i! manager. ea#se ever& '!rtf!$i! manager is different" investment

st&$es var& fr!m !ne f#nd t! the ne(t s!metimes s#*t$& and s!metimes dramatia$$&. G#st as itJs

im'!rtant t! diversif& &!#r investments am!ng asset ateg!ries s#h as st!+s" *!nds and ash

e,#iva$ents" itJs a$s! im'!rtant t! diversif& *& investment management strategies. 4!ing s! %i$$

he$' &!# ta+e diversifiati!n t! a higher $eve$" and ma& a$s! he$' &!# t! ma(imi@e ret#rns %hi$e

minimi@ing ris+.

T! $earn m!re a*!#t the different investment strategies" aess the f!$$!%ing $in+s *e$!%:

4iversifiati!n

#iversi"i!ation an asset allo!ation

ItJs im'!rtant t! ma+e a distinti!n *et%een diversifiati!n and asset a$$!ati!n. Asset a$$!ati!n

is the 'erentage !f &!#r t!ta$ a!#nt va$#e in eah asset $assst!+s" *!nds" and sh!rtterm

investments. 4iversifiati!n is s'reading &!#r m!ne& ar!ss man& different investments" either

%ithin a 'arti#$ar asset $ass /$arge !m'an& st!+s" midsi@ed !m'an& st!+s" sma$$ !m'an&

st!+s" et.0 !r am!ng vari!#s asset $asses. S! itJs '!ssi*$e t! have a diversified '!rtf!$i! that is

1?? invested in st!+s.

At first" &!# might *e !nf#sed m!re a*!#t the !ne'ts !f diversifiati!n and asset a$$!ati!n"

s! &!# ma& %ant t! revie% them in greater detai$. This site is !ne !f man& t!!$s avai$a*$e t! he$'

&!# $earn a*!#t diversifiati!n. =!# an s#''$ement the inf!rmati!n 'r!vided %ith !ther s!#res

s#h as 'ers!na$ investment maga@ines and *!!+s" the finania$ seti!n !f $!a$ and nati!na$

ne%s'a'ers" and !mmeria$ %e*sites. A !ns#$tati!n %ith a finania$ '$anner ma& *e neessar&

t! determine %hat is right f!r &!#.

sing 4iversifiati!n)Asset a$$!ati!n as 'art !f &!#r investment strateg& neither ass#res n!r

g#arantees *etter 'erf!rmane and ann!t 'r!tet against $!sses in de$ining mar+ets.

?onc%usion

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WeJve intr!d#ed man& t!'is in this t#t!ria$:

Reinvesting &!#r earnings a$$!%s &!# t! ta+e advantage !f !m'!#nding.

Eah invest!r is different in his !r her !*-etives and ris+ t!$erane.

There isnJt -#st !ne strateg& that an *e #sed t! invest s#essf#$$&.

Eah investment vehi$e has its !%n #ni,#e harateristis.

4iversif&ing investments in a '!rtf!$i! he$'s t! manage ris+.

T!gether" a$$ these '!ints ma+e #' a f!#ndati!n !f +n!%$edge %ith %hih an& invest!r sh!#$d *e

!mf!rta*$e. H!%ever" these !ne'ts mean n!thing #n$ess &!# an '#t them int! 'ratie. ItJs

great t! +n!% that !m'!#nding ae$erates &!#r investment earnings" *#t the rea$ ,#esti!n is

h!% d! &!# ta+e advantage !f !m'!#nding and at#a$$& ma+e m!ne&K In this seti!n %eJ$$ g!

!ver an e(am'$e that dem!nstrates h!% t! '#t a$$ !f %hat &!#Jve $earned int! ati!n.

The Strate30

9!r !#r e(am'$e" $etJs $!!+ at a fiti!na$ invest!r named Me$anie. Me$anie is a t%ent&s!mething

%h! is re$ative$& ne% t! investing. Me$anie +n!%s that she %ants t! invest" *#t isnJt s#re -#st h!%

t! d! it. Her +n!%$edge !f finanes is g!!d" *#t she has n! desire t! s'end her free time '!ring

!ver finania$ statements /!r $!sing s$ee' *ea#se !f her investments0.

After he+ing !#t this t#t!ria$ and reading m!re a*!#t st!+s and m#t#a$ f#nds" Me$anie $earns

that there are t%! *asi st&$es !f'!rtf!$i! management:'assiveand ative. Eah !f these st&$es

res#$ts fr!m a different a''r!ah t! the mar+et. The g!a$ !f ative management is t! se$et

se#rities that %i$$ 'erf!rm *etter than the !vera$$ mar+et. 9!r e(am'$e" %hen a m#t#a$ f#nd

manager ana$&@es a !m'an&Js finania$ statements t

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REFERANCE

Attri*#ti!n: A 3#ide t! What it is" H!% t! Ca$#$ate it" and H!% t! se it. SA: M3ra%

!die" Fane"Mar#s" Investments" thediti!n. Ne% =!r+: M3ra% Hi$$)Ir%in" >??D

Cam'isi" Ste'hen. Primer !n 9i(ed Hi$$s" >??< ! determine if the st!+ is s#ita*$e f!r the

f#nd" he !r she is ative$& managing the '!rtf!$i! In!me Perf!rmane Attri*#ti!n" G!#rna$ !f

Perf!rmane Meas#rement: S#mmer >???: 1>

9a*!@@i" G.9ran+" !nd Mar+ets" Ana$&sis and Strategies. thediti!n. Ne% Gerse&: Prentie

Ha$$" In." >???

9ei*e$" r#e G. Investment Perf!rmane Management" Ne% Gerse&: G!hn Wi$e& Q S!ns" In."

>??