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Investment Process Introduction

Updated:2018-1-22 17:53:05    Source:www.tannet-group.comViews:457

Investment process starts with the investor's needs and preferences. The first and most critical component of this part of the process is the risk assessment part.The second component of this part of the process is an understanding of the cash needs of the investor. And the third component is the tax status of the investor.

Generally speaking, there are four main steps involved in investment process.
(1) Investment Policy
The first stage determines and involves personal financial affairs and objectives before making investments. It may also be called preparation of the investment policy stage.

The investor has to see that he should be able to create an emergency fund, an element of liquidity and quick convertibility of securities into cash. This stage may, therefore; be considered appropriate for identifying investment assets and considering the various features of investments.

(2) Investment Analysis
When a individual has arranged a logical order of the types of investments that he requires on his portfolio, the next step is to analyse the securities available for investment. He must make a comparative analysis of the type of industry, kind of security and fixed vs. variable securities. The primary concerns at this stage would be to form beliefs regarding future behaviour or prices and stocks, the expected returns and associated risk.

(3) Valuation of Securities
The third step is perhaps the most important consideration of the valuation of investments. Investment value, in general, is taken to be the present worth to the owners of future benefits from investments. The investor has to bear in mind the value of these investments.

(4) Portfolio Construction
Under features of an investment programme, portfolio construction requires a knowledge of the different aspects of securities. These are briefly recapitulated here, consisting of safety and growth of principal, liquidity of assets after taking into account the stage involving investment timing, selection of investment, allocation of savings to different investments and feedback of portfolio. (Note: part of the contents are drew from yourarticlelibrary)

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