Investment Terms

Definition of Portfolio Management

Portfolio Management Definition

It is a process of encompassing many activities of investment in assets and securities. The portfolio management includes the planning, supervision, timing, rationalism and conservatism in the selection of securities to meet investor’s objectives. It is the process of selecting a list of securities that will provide the investor with a maximum yield constant with the risk he wishes to assume.

The portfolio management is growing rapidly serving broad array of investors — both individual and institutional — with investment portfolio ranging in asset size from few thousands to crores of rupees. Despite growing importance, the subject of portfolio and investment management is new in the country and is largely misunderstood.… Read the rest

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Financial and Economic Meaning of Investment

Investment is the employment of funds with the aim of getting return on it. In general terms, investment means the use of money in the hope of making more money. In finance, investment means the purchase of a financial product or other item of value with an expectation of favorable future returns. Investment of hard earned money is a crucial activity of every human being. Investment is the commitment of funds which have been saved from current consumption with the hope that some benefits will be received in future. Thus, it is a reward for waiting for money. Savings of the people are invested in assets depending on their risk and return demands.… Read the rest

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Basic Investment Objectives

Investing is a wide spread practice and many have made their fortunes in the process. The starting point in this process is to determine the characteristics of the various investments and then matching them with the individuals need and preferences. All personal investing is designed in order to achieve certain objectives. These objectives may be tangible such as buying a car, house etc. and intangible objectives such as social status, security etc. similarly; these objectives may be classified as financial or personal objectives. Financial objectives are safety, profitability, and liquidity. Personal or individual objectives may be related to personal characteristics of individuals such as family commitments, status, dependents, educational requirements, income, consumption and provision for retirement etc.… Read the rest

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Offshore Derivatives Instruments (Participatory Notes)

Offshore derivatives instruments (ODIs) are investment vehicles used by overseas investors not registered with the SEBI for an exposure in Indian equities or equity derivatives. They may not be registered with SEBI, either because they do not want to, or due to regulatory constraints for which they are not allowed to. It is a registered FII that makes purchases on behalf of these investors and the FII s affiliate issues those ODIs. ODIs include equity-linked notes, capped return notes, participating return notes, etc.

Participatory Notes (P-Notes) is one of the categories of ODIs. The underlying asset class could be stocks, and returns would be directly related to the appreciation in prices of those stocks.… Read the rest

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Tax liability attached to a demutualized stock exchange

When a trading right is acquired, and a share is allotted to a member of an stock exchange by virtue of which he acquires a membership privilege against the extinguishment of the previous right of membership, no transfer of assets effectively takes place and neither of the acquisitions should therefore be deemed to be a transfer within the meaning of the word in the Income Tax Act. However, at the point of sale of any of these two rights, capital gains tax would be attracted.

Since the above processes are necessary to implement a policy announced by the Government, and in the larger interests of the securities market in India as well as in the interests of investors, it would be necessary to ensure that both the processes described above are tax neutral and no additional tax liability is attached either to the stock exchange or to a member of a stock exchange which is implementing an approved scheme of demutualization.… Read the rest

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Rights Issue or Rights Offering

RIGHTS ISSUE

Normally, whenever an existing company makes a fresh issue of equity capital or convertible debentures the existing shareholders or convertible debenture holders have the first right to subscribe to the issue in proportion to their existing holdings.   Only what is not subscribed to by the existing shareholders can be issued to the public.   Thus, an issue offered to the existing shareholders or convertible debenture holders as their right is known as rights issue, as opposed to an issue open to the public at large, in which case we call it a public issue.   An investor may exercise this right to subscribe to the offered issue, or he may sell the rights separately in the market.  … Read the rest

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