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Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete Notes

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University : Here we provide direct download links for Unit II Investment Environment   For Financial Planning MCOM Sem 1 Delhi University notes in pdf format. Download these Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete notes in pdf format and read well.

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete Notes

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University :  The economic and financial conditions in a country that affect whether individuals and businesses are willing to lend money and acquire a stake in the businesses operating there. Investment climate is affected by many factors, including: poverty, crime, infrastructure, workforce, national security, political instability, regime uncertainty, taxes, rule of law, property rights, government regulations, government transparency and government accountability.

Download here Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete Notes in pdf format 

BREAKING DOWN ‘Investment Environment ‘

An unfavorable investment climate is one of the many hindrances faced by underdeveloped nations. Regulatory reform is often a key component of removing the barriers to investment. A number of nonprofit organizations have been established for the purpose of improving the investment climate and spurring economic development in these countries. Also, some investors are willing to take on the high level of risk and volatility associated with investing in an unfavorable climate because of the potential that the high risk will be rewarded with high returns.

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete Notes

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University :  While we dwell on the investment environment, we shall discuss the following aspects:

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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.

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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”.

CYCLE PROGRAMS AND PONZI SCHEMES: People make money and people lose money with cycling programs. People also make or lose money with network marketing and any other kind of legitimate business under the sun! While Ponzi schemes are illegal, some people make money with them, too, while many more lose money. I would like to give the reader some information about Ponzi schemes and about “Cycling” programs.

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete Notes

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University :   This pages is not investment advice. The authors are not responsible for any losses arising from following any strategies described on this page. All investment advice must take into account the personal circumstances of the investor. The authors of this page do not know the circumstances of any person reading this page so are not in a position to offer advice, even if licenced to do so, which they do not claim to be.

There are many macro considerations to investment. This article notes and overviews some of them. Each is worthy of separate page.

Six great resources:
Business Cycle Monitor slideshows
D Short – Great historical charts and context
Mark J Lundeen articles
Yahoo International indexes with technical analysis
Incredible Charts ASX Share Prices

Consider changing your buy/sell/hold position when any of the following happen. If you expect a major decline the main countercyclical investments are long term government bonds (because interest rates are lowered in recessions) and sometimes physical gold (and sometimes gold futures). Also consider currency exposures – in a recession the US is often a strong safe haven and the AUD (Australian Dollar) weak as it is significantly weakened by falling commodity prices:

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete Notes

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University :  Annual earnings are not necessarily a great indicator. In the early 30’s markets rose as earnings fell. This affects annual PE’s too, which is why Shiller uses 10 years earnings for a PE10 based on 10 years earnings. If earnings and PE seem out of kilter (too low compared to stock prices) they can come back into line from either rising earnings or a falling market. If the market is at historical highs it might be more likely the market will fall, if the market and earnings have had a very large fall, it might be more likely that the earnings might rise.

Valuation

A quote from John Hussman of Hussman Funds:
(START QUOTE)
Consider the following conditions: 1) market valuations above their historical norm by any amount at all – for example, a dividend yield on the S&P 500 anything less than 3.7%, and; 2) The 10-year Treasury bond yield and the year-over-year CPI inflation rate higher than their levels of 6 months earlier (regardless of whether their absolute levels have been high or low).

If you look at market history since 1940, this condition has been in effect nearly 20% of the time. Yet this set of factors alone has made an enormous difference in the returns achieved by the market. When the above conditions have been in effect at the same time, the S&P 500 has actually lost ground on a price basis, and has delivered an annualized return of just 0.28%. In contrast, when those conditions have not been in effect, the market has advanced at an average annualized rate of 14.94%. Of course, these averages mask a lot of volatility, but it is clear that even the most basic combination of low stock yields and rising yield pressures is hostile to total returns.

To the above conditions, if Treasury bill yields are also higher than 6 months earlier (again, regardless of the absolute level of yields), the annualized return drops to -0.83%. Add a discount rate higher than 6 months earlier, and the annualized return drops to -2.22%.

Now add overbought conditions (say, a 12-month advance in the S&P 500 of greater than 30%), and the annualized return turns sharply negative, to -39.17%. Overvalued, overbought, conditions with rising yield pressures are trouble. Given those conditions, excessive bullishness only worsens the situation. Now, this combination of conditions has never persisted for an entire year, so the actual loss sustained by the market is not so extreme, but suffice it to say that the typical loss has been in excess of 10%. Based on the current overbought status of the market, there are only three similar periods that we can identify in post-war data: August-October 1999 (which was followed by an abrupt air pocket of greater than 10%), September-October 1987 (no comment required), and September-December 1955 (which was followed by a 10% correction, a brief recovery, and a secondary decline to re-test the initial low). (END QUOTE)

Unit II Investment Environment For Financial Planning MCOM Sem 1 Delhi University Complete Notes

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