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PowerPoint Presentation for Practical Investment Management by Robert A. Strong prepared by Yee-Tien Fu National Cheng-Chi University CHAPTER ONE THE CONCEPT OF INVESTING Practical Investment Management Robert A. Strong Outline Investing Defined Investment Alternatives

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Presentation Transcript
slide1

PowerPoint Presentation

for

Practical Investment Management

by

Robert A. Strong

prepared by

Yee-Tien Fu

National Cheng-Chi University

slide2

CHAPTER ONE

THE CONCEPT OF INVESTING

Practical Investment Management

Robert A. Strong

slide3

Outline

  • Investing Defined
  • Investment Alternatives

Assets Securities Security Groupings

  • Three Reasons for Investing
    • Income AppreciationExcitement
  • The Academic Study of Investments
    • Theoretical Research
    • Empirical Research
    • Professors v.s. Practitioners
slide4

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, investing is risky,

saving is not.

slide5

Investment Alternatives

Assets

financial assets

real assets

e.g. bond, stock

e.g. land

Assets are things that people own.

Financial assets have a

corresponding liability,

while real assets do not.

slide6

Investment Alternatives

A security is a legal document that

shows an ownership interest.

Securities are historically associated

with financial assets, but are also

applicable to real assets.

Securitization is the process of

converting an asset or collection of

assets into a more marketable form.

slide7

Investment Alternatives

Securities

Equity

Securities

e.g. common

stock

Fixed Income

Securities

e.g. bonds,

preferred stock

Derivative Assets

e.g. futures,

options

These are the three broad categories of securities.

slide8

Three Reasons for Investing

Why invest ???

  • People invest to …
  •  supplement their income
  •  earn capital gains
    • Appreciation is an increase in the
    • value of an investment.
  •  experience the excitement of the
    • investment process
slide9

The Academic Study of Investments

Theoretical research builds

mathematical models and

proposes pricing relationships

rather than studies actual

market data.

E.g. arbitrage relationships,

impact of stock splits and

cash dividends on investors

Theoretical models are tested by

conducting empirical research.

slide10

The Academic Study of Investments

Empirical research uses actual market data

rather than mathematical models.

An anomaly is an observed result that

defies explanation within the known

theoretical framework.

slide11

The Academic Study of Investments

v.s.

Professors

Practitioners

The investment community can learn much

from both rigorous academic research and

from the life experiences of people on the

front lines of the marketplace.

slide12

Review

  • Investing Defined
  • Investment Alternatives

Assets Securities Security Groupings

  • Three Reasons for Investing
    • Income AppreciationExcitement
  • The Academic Study of Investments
    • Theoretical Research
    • Empirical Research
    • Professors v.s. Practitioners