Chapter 1 The Role and Scope of Investments

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Chapter 1 The Role and Scope of Investments
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Investments and the Investment Process

• Types of Investments. Investments can be
  differentiated on the basis of a number of
  factors.
• Securities or Property
• Direct or Indirect
• Debt, Equity or Derivative Securities
• Low or High Risk
• Short or Long Term
• Domestic or Foreign

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Figure 1.1 The Investment Process
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Structure of the Investment Process

• Participants in the Investment Process
• Government
• Business
• Individuals
• Types of Investors
• Individuals
• Institutional Investors

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Table 1.1 Overview of Investment Vehicles
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Steps In Investing

• Meeting Individual Prerequisites
• Establishing Investment Goals
• Accumulating Retirement Funds
• Enhancing Current Income
• Saving for Major Expenditures
• Sheltering Income from Taxes
• Adopting an Investment Plan
• Evaluating Investment Vehicles
• Selecting Suitable Investments
• Constructing a Diversified Portfolio
• Managing the Portfolio

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Considering Personal Taxes

• Basic Sources of Taxation
• Federal Income Taxes
• State and Local Income Taxes
• Types of Income
• Active Income
• Portfolio Income
• Passive Income
• Ordinary Income
• Capital Gains and Losses

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Investing Over the Life Cycle

• Growth-Oriented Youth (age 20 to 45)
• Middle-Age Consolidation (age 45 to 60)
• Income-Oriented Retirement Years (age 60)

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Figure 1.2 Different Stages of an
Economic/Market Cycle
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Meeting Liquidity Needs Investing in Short-Term
Investment Vehicles

• The Role of Short-Term Investment Vehicles
• Interest on Short-Term Investments
• Risk Characteristics
• Advantages and Disadvantages of Short-Term
  Investments

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Meeting Liquidity Needs Investing in Short-Term
Investment Vehicles

• Popular Short-Term Investment Vehicles
• Deposit Accounts
• Series EE Savings Bonds
• U.S. Treasury Bills
• Non-Government Short-Term Securities
• Certificates of Deposit (CDs)
• Commercial Paper
• Bankers Acceptances
• Money Market Mutual Funds