CHAPTER ONE THE CONCEPT OF NVESTING Practical Investment Management Robert A Strong
CHAPTER ONE Practical Investment Management Robert A. Strong THE CONCEPT OF INVESTING
Investing Defined To consume, to save, or to invest a dollar that is earned Both saving and investing amount to consumption shifting through time However, saving involves little, if any, risk, while investing is a risky endeavor Strong Cl-The Concept of Investing 12
1 - 2 Strong C1 – The Concept of Investing To consume, to save, or to invest a dollar that is earned ? Both saving and investing amount to consumption shifting through time. Investing Defined However, saving involves little, if any, risk, while investing is a risky endeavor
Investment alternatives Assets are things that people own Financial assets have a corresponding liability, while real assets do not Assets Financial Assets Real Assets e.g. bond, stock e. g. land Strong Cl-The Concept of Investing 13
1 - 3 Strong C1 – The Concept of Investing Assets Financial Assets Real Assets e.g. bond, stock e.g. land Assets are things that people own. Investment Alternatives Financial assets have a corresponding liability, while real assets do not
Investment alternatives a security is a legal document that shows an ownership interest Although securities are historically associated with financial assets, they are also applicable to real assets. Securitization is the process of converting an asset or collection of assets into a more marketable form Strong Cl-The Concept of Investing 14
1 - 4 Strong C1 – The Concept of Investing Securitization is the process of converting an asset or collection of assets into a more marketable form. A security is a legal document that shows an ownership interest. Although securities are historically associated with financial assets, they are also applicable to real assets. Investment Alternatives
Investment alternatives There are three broad categories of securities Securities Equity Fixed Income Derivative Securities Securities Assets e.g. common e. g. bonds,-x e.g. futures, stock preferred sto options Strong Cl-The Concept of Investing 15
1 - 5 Strong C1 – The Concept of Investing There are three broad categories of securities. Securities Equity Securities e.g. common stock Derivative Assets e.g. futures, options Fixed Income Securities e.g. bonds, preferred stock Investment Alternatives