Narach Investment

Investment Management: An Introduction

The main reason for the publication of this website, is to make you (the reader) aware of the investment world and how to manage your way around it. And also what the investment advisors are expected to explain to you.

Introduction

Investment is putting aside and employing money in financial instruments in the present, with the expectation of a positive rate of return in the future.

The 5 Questions

Before taking on the exercise of investment and its management, the investor is well advised to do the planning before hand and ask all the questions he or she can.

Why to Invest?

The investor would want to invest mainly to increase the rate of return on his assets.

What to Invest?

The investor would mainly invest his time, effort and financial resources (including savings and reserves) in this endeavor of investment management.

Where to Invest?

There are many financial investment avenues available today to the investor.

When to Invest?

Here the investor would decide when to invest (or buy) and when to divest (or sell) a financial instrument, keeping the return on investment in mind.

How to Invest?

This would require the investor to have in place an investment system with all its checks and balances.

Investment Management Process

The starting point would be to understand the investment management process.

Setting the Investment Objective

The first step for the investor is to set the investment objective.

Establishing Investment Policy

Setting policy begins with asset allocation amongst the major asset classes available in the capital market.

Selecting the Portfolio Strategy

The portfolio strategy selected would have to be in conformity with both the objectives and policy guidelines.

Selecting the Assets

It is of importance for the investor to select specific assets to be included in the portfolio. It is here that the investor or manager attempts to construct an optimal or efficient portfolio.

Measuring and Evaluating Performance

This step would involve the measuring and evaluating of portfolio performance relative to a realistic benchmark.

Investment Environment

A study and understanding of the investment environment would be of importance to the investor.

Introduction to the Investment Environment

To study the investment environment would be of importance to the investor, as it would also encompass the demand supply match/mismatch.

Investment Avenues

There are a large number of investment instruments available today.

Investment Attributes

To enable the evaluation and a reasonable comparison of various investment avenues, the investor should study the following attributes: Rate of return, Risk, Marketability, Taxes and Convenience.

Comparison of Investment Avenues

Comparison of investment avenues.

Investment Decision Making: Approaches

As investors we would have diverse investment strategies with the primary aim to achieve superior performance, which would also mean a higher rate of return on our investments.

Common Errors in Investment Management

In any endeavor we undertake, we are sometimes right and make correct decisions and sometimes we are wrong and prone to errors.

Investment and Speculation

There is a very thin and blurred line between investing and speculating or gambling.

Investment Wisdom

Listed below are wisdom one liners which would give an investor an insight to what he or she is up against.

Securities Market

The term securities markets enclose a number of markets in which securities can be bought and sold.

Understanding Investment Banks

As investors seeking a better understanding of the investment environment it would be appropriate the composition, structure and various functions associated with investment banks; as they are amongst the important participants of the global financial markets.

The Broker

As investors we are unable to deal with the markets directly. So, the markets introduce and authorize the middleman to act on its behalf. This middleman is also called the Broker.

Cycle Programs and Ponzi Schemes

People make money and people lose money with cycling programs. People also make or lose money with network marketing and any other kind of legitimate business under the sun! While Ponzi schemes are illegal, some people make money with them, too, while many more lose money. I would like to give the reader some information about Ponzi schemes and about Cycling programs.

Active Asset Allocation

Active asset allocation would be of importance to the investor with respect to decisions regarding where exactly to deploy his resources and in what proportion.

Introduction to Asset Allocation

Asset allocation or active asset allocation is of interest to all investors.

Asset Allocation Classes

There are three distinct classes of asset allocation. Namely, Long term asset allocation, Active asset allocation and Portfolio insurance.

Tactical Asset Allocation

Tactical asset allocation can be compared with sector rotation.

Management of Asset Allocation

Long term asset allocation is established on the basis of careful analysis. Tactical asset allocation provides the structure and a disciplined framework to prevent such errors. If in the equity market, one stock becomes undervalued relative to a second stock. Then money would flow from the second stock to the first, to bring it up and back to its fair value.

Selecting an Asset Management Team

Becoming successful in business is not a my way or the highway type of deal. Finding the perfect investment firm to manage your assets should not be either. Because there are so many industries, so many investors, and so many different strategies of success, picking the right asset management team can be an overwhelming task. However it doesn’t have to be.

Asset Allocation Process

The asset allocation process would require a disciplined structure based on three assumptions. The securities market indicates the rate of returns available in the various asset classes. There is a normal relationship among these implied returns. The securities market correct disequilibrium conditions when they occur.

The Portfolio Upgrade

A portfolio comprises of two types or categories of stocks, namely the buy candidates and the hold candidates.

Using Futures in Asset Allocation

Transaction costs are the main hindrance to the active or tactical asset allocation process. The transaction cost has to be paid for whether the investor is buying or selling to accomplish a shift in the asset mix of his portfolio.

Investment Management and Trading in the Stock Market

Trading is basically buying and selling a financial instrument, like a stock quoted in the stock market. And making a profit from the transaction. That is the investor’s selling price is more than the cost price.

Estimation of the Intrinsic Value of a Stock

The procedure commonly used by investment analysts to estimate the intrinsic value of a stock traded in the stock market consists of the following steps: Estimate the expected earnings per share of the stock. Establish a price earning multiplier (or P/E ratio). Develop a value anchor and a value range.

Technical analysis: Stock Prices and Moving Averages

It would be prudent for investors to give due regard and weightage to aspects of technical analysis while making decisions with respect to their investments in the stock markets. Technical analysis in itself would revolve around the application of statistical and mathematical models and formulae to the historical daily price and volume data of the stocks they (that is, the investors) may have under study; with a view to identifying trends both upward and downward which are likely to repeat themselves in the future.

Technical analysis: Stock Prices and the Fibonacci Studies

It would yet again be prudent for investors to give due regard and weightage to aspects of the Fibonacci studies in conjunction with other technical analysis tools they may be applying to the price volume charts of the stocks they may have under study for investment at a later date and while making decisions with respect to their investments in the stock markets. Fibonacci studies in themselves would revolve around application of a sequence of numbers where each successive number is the sum of the previous two numbers.

Technical analysis: Stock Prices and the Elliott Wave

On occasion investors may observe that the stock markets and the stocks traded in them appear to follow repetitive patterns; and are identifiable in series of waves quite like a building up followed by a subsequent breaking down. The basic tenants of the Elliott wave theory are described below.

Technical analysis: Stock Prices and Momentum Indicators

It would be relevant for investors to look at the momentum of the stock prices in consonance with the price volume charts of the stocks they may have under study for investment at a later date and while making decisions with respect to their investments in the stock markets. Momentum would in itself be a measure of the velocity of a price move whether upward or downward; and would revolve in and around the study of select indicators like the rate of change (or the ROC), the relative strength (or the RSI), the moving average convergence divergence (or the MACD) and the stochastic indicators.

Margin of Safety

The central concern of all investors in their investment policy is to always ensure a margin of safety in all their transactions in financial instruments.

The Time Value of Money

As investors it is of some importance and interest for us to have an understanding of the time value of money. And to appreciate the reasons why a unit of money (let's say the Indian Rupee) today has more value than it would have a year or two later.

Investment Management and Inflation

It would be of some interest to the investor to have an understanding of inflation and what effect it would have on the various financial instruments being held in his portfolio. A simplistic definition of the word itself would be an increase in prices in general and an increase in the supply of money is regarded to cause this.

Investment Management and the First Trade

So, we have buyers, holders and sellers who have all traded! Take a step back, and look at the sequence: buying, holding and selling. You would realize that these are the three parts of the same composite trade.

Investment Management and the First Position

A position in a stock is built over a period of time, while purchasing the same stock over various price levels. However, to begin with we would initiate a position only when we have a confirmation of oversold levels and that there is a reasonable margin of safety available to us.

Investment Management and News Flow Integration

The news media would have us believe that there is a reason behind every day’s stock market move. We as investors have all read newspaper headlines stating, “stock markets rise 2% on the back of improved earnings” or “the stock market index sank 3% as market participants were wary of taking fresh positions”. Sounds quite like a self-fulfilling prophecy one way or the other. Probably fulfilling the newsman’s need to print tomorrow’s newspaper.

Investment Management Market Failures and Business Cycles

The following is the most comprehensive ever explanation to the most mysterious phenomenon of Capitalism – the Business Cycles. In order to ensure that the article can be read by any well educated reader, I have minimized the economics jargon and have added a short and simple introduction to the structure of the economy. Each and every one of us would be interested to know as to why we cannot have a paradise on earth.

Stock Market Investment Rules

The stock markets or equity markets are large market places or trading platforms in the modern sense of the word; where investors buy and sell equity shares or part ownership of various corporations representing various industries and services. To engage in this exercise of buying and selling equity shares the investor would be required to follow certain rules, to enable a successful and profitable conclusion to their transactions or trades.

Stock Market Investment Strategies

The stock market investment strategies are relevant to investors who are in it for the long haul. There are basically two strategies that an investor can apply the first one being to buy low and sell high and the second one being to buy high and sell higher.

Stock Market Investment Plan

The bulls and bears of the stock market are both tempting and scary to the investors. Speculators are enchanted by the stock market potential to help them in making quick money with a big M. While those who tread with care and caution, often shy away for fear of losing. However, the stock market is not all about speculative gains or black Tuesdays. It is a place where committed companies look for raising money to fund their activities.

Investment Management and Stock Market Simulation

An investor would be well advised to have an investment system in the first place. Then the investor would be required to test his system through stock market simulation. This would require the investor to conduct dry runs using pen and paper. In fact, in today's time and age it would be more appropriate to use a personal computer, to bring in a certain level of efficiency to this exercise.

Investment Management and Investor Preparation

At this stage we expect that the investor has done the preliminary preparation to undertake his investment management exercise.

Psychology of the Successful Investor

The equity and other markets across the globe are full of investors. Some are successful, some meandering along and others facing outright failure.

Qualities of the Successful Investor

Given the potential rewards, the risks being reasonable and given a method of well-defined risk management the equity markets across the globe (to our thinking) are the best game in town. However, the investor would require qualities of head and heart to achieve this success. These qualities of the successful investor listed and described below, would also be relevant to the other financial markets.

Risk and Return

When the investor want to invest his money at a higher rate of return there is a higher factor of risk.

The Capital Asset Pricing Model

The Capital Asset Pricing Model would find its beginnings in work done in this regard by William Sharpe; and later attended upon by Markowitz, while attempting to explain how assets should be priced in the capital markets. This was undertaken while deriving the relationship between the expected return and systemic risk pertaining to individual securities (including stocks) and portfolios. However, capital market theory would be relevant to how asset pricing should occur if the investors were to behave in a fashion suggested by Markowitz.

The Arbitrage Pricing Theory

Underlying the arbitrage pricing theory is the acknowledgement that more than one systemic factor would effect the returns on a security an investor may have in his portfolio. This is unlike the capital asset pricing model, which requires only the beta of a security against the market to measure risk.

Market Efficiency

Market efficiency describes the operating characteristics of the capital market.

Etrade and the Three-In-One Account

Most investor seek a certain level of efficiency and safety with regard to their transactions in the stock market while buying and selling stocks for and from their portfolio; and also the suitable crediting and debiting of the monetary amount or value of their transactions to and from their savings bank account, respectively.

Risk Control and Investment Capital Management

Most would believe that buying and selling of stocks and other financial instruments would qualify as investment, and it would be so upto a certain point in the investment management process. However, for an investor to implement a successful investment program it would be imperative for him to consider this matter of investment from the point of view of both risk control and investment capital management.

National Stock Exchange India: The Nifty List

The purpose of this webpage is to make the individual investor aware of the 50 stocks underlying the Nifty index. The Nifty itself is the benchmark stock market index of the National Stock Exchange, India (also called NSE, India). The stocks have been listed in alphabetic order for convenience, along with relevant data to enable ease of investment decision making.

Investment Management and Mutual Funds

Mutual funds and their various portfolios under management are addressed towards individual investors (both men and women) who are otherwise busy with their mainstream careers; and probably have very little time available to attend to their personal investments. A mutual fund is a portfolio comprising of various financial instruments ranging from investment grade stocks traded in the stock markets to high grade bonds and government securities depending on the underlying objectives of the specified mutual fund under study; and the corpus of the same is managed by fund managers and financial specialists.

Investment Management and Annuity

Many people today are looking for annuity help. The biggest challenge seems to be that most of the help is biased. What exactly do I mean? I mean that there is always a vested interest for the person who is helping you with your annuities. They are out to sell you something so you do not know if they are doing it for your best interest or for theirs.

Investment Management and ISO 9000 Registration

You have made the plans, built the quality system and conducted the audit. So how do you register your company as ISO 9001 conformant? And how can you be sure you are getting the most value for your investment? Here is how the process works to certifying Your Company for ISO 9001.

Small Business Investments

State laws have been relaxed to make it easier for small business to raise start-up and growth financing from the public. Many investors view this as an opportunity to get in on the ground floor of an emerging business and to hit it big as the small businesses grow into large ones.

Venture Capital and Negotiation Issues

When companies enter into negotiations with venture capital firms, there are several issues which need to be defined and agreed upon. The key issues are listed and described below.

Investment Management and Forex Trading

You may have heard about Forex trading and seen many sites on the internet propagating this seemingly great investment opportunity. In fact, a lot of interest has been generated in this investment instrument. There are some organizations running TV commercials, offering this Forex trading as a sure fire system that is expected to bring windfall profits in an easy fashion to the individual investor; along-with the fine print of a disclaimer.

Forex Market: Similarities between Stock and Currency Trading

Experienced stock traders are always on the lookout for new opportunities, and as a new era of volatility enters our global markets, the appeal of the foreign exchange market continues to grow for anyone that has yet to test the waters of the currency world.

Forex Market: Differences between Stock and Currency Trading

The forex market has gathered enormous appeal over the past decade, causing traders in other mediums to wonder if they could easily expand their opportunity horizons beyond stocks to include global currencies in their trading universe.

Online Forex Trading

Forex trading online is a fast way to use your investment capital to its fullest. The Forex markets offer distinct advantages to the small and large traders alike, making Forex currency trading in many ways preferable to other markets such as stocks, options or traditional futures. Here are seven reasons why you'll want to look into Forex Trading online.

Investment Management and Real Estate

One of the most consistently returning asset classes as an investment over the long term; and the one that the majority of us can profit from is real estate. However, good management skills on your part is a prerequisite.

Real Estate and Home Loan Secrets

Building a home is amongst the primary objectives of any reasonable and right thinking man and family. However, the demographics, the age group, cultural background, peer group influences have a role to play in regard to the decision and timing of building and living in your own home.

Real Estate Investment Success

The last downturn of the global stock market saw millions of everyday investors having their fingers badly burned. Overnight life savings were eaten away, retirement funds went into decline and the economic forecast for all of us who had any money invested in stocks and shares was gloomy to say the very least.

Real Estate Investment Financing

Unlike traditional residential real estate mortgages, real estate investment financing is way more creative and offers more options than you think. The golden rule in real estate investment is OPM or Other People Money.

Role of Options and Futures

With the introduction of options and futures, investment risk management has assumed a new dimension. Though the manager can achieve a high degree of freedom, it does not alter the market profile of an equity portfolio economically or quickly.

What are Options?

Stock markets by their very nature are fickle. While fortunes can be made in a jiffy, more often than not the scenario is the reverse. Investing in stocks has two sides to it: a) Unlimited profit potential from any upside; or b) a downside which could make you a pauper. Derivative products are structured precisely for this reason; that is to curtail the risk exposure of an investor. Index futures and stock options are instruments that enable the investor to hedge his portfolio or open positions in the market. Options contracts allow you to run your profits while restricting your downside risk.

Types of Options

An option is a contract between two parties giving the taker (or buyer) the right, but not the obligation, to buy or sell a parcel of stocks or shares at a predetermined price; possibly on or before a predetermined date. To acquire this right the buyer pays a premium to the writer (or seller) of the contract.

Option Styles, Class and Series

It would be useful for the investor to know that the settlement of options is based on the expiry date. However, there are two basic styles of options you would encounter which effect settlement. These styles have geographical names, which have nothing to do with the location an options contract is agreed upon! These styles are European options and American options.

Option Concepts

The investor would find it useful to know certain important terms used with regard to transactions in options. These terms are listed below: Strike price, In-the-money, Out-of-the-money, At-the-money, Covered Call, and Covered Put.

Pricing of Options

As has already been explained options are used as risk management tools and the valuation or pricing of these instruments is a careful balance of market factors. There are four major factors affecting the options premium; namely, the price of the underlying, time of expiry, exercise price time to maturity and volatility of the underlying. While there are two lesser important factors; namely, the short term interest rate and dividends.

Determining Options Premium and the Greeks

The Options premium is determined by three factors; namely, intrinsic value, time value and volatility. Now, there are more sophisticated tools applied to measure the potential variations of and in the Options premiums. These tools would be the Delta, the Gamma, the Theta, the Vega and the Rho. These have been explained in some detail below.

Options Pricing Models

There are various Option pricing models which traders utilize to arrive at the correct value of the Options they may have under study. Amongst the more popular models would be the Binomial Pricing Model and the Black & Scholes Model. Both of which are explained in some detail below:

Options Trading Strategies in a Bull Market

Whether the stock market and the stocks traded in them are in a bullish trend or bearish mode both the Call options and Put options are available to an investor. Keeping this in view and that the stock market were to be in a bull run, the investor would be able to utilize the Call options in a bullish Call spread strategy or the Put option in a bullish Put spread strategy.

Options Trading Strategies in a Bear Market

When the stock market and the stocks traded in them are in a bearish mode both the Call options and Put options are available to an investor. Keeping this in view and that the stock market were to be in a bear phase, the investor would be able to utilize the Put option in a bearish Put spread strategy or the Call options in a bearish Call spread strategy.

Options Trading Strategies in a Volatile Market

Volatile market trading strategies are appropriate when the investor believes that the market would move but does not have an opinion on the direction of the movement of the market. As long as there is significant movement upwards and downwards, these strategies offer profit opportunities. The investor need not be either bullish or bearish; he must simply be of the opinion that the market would be volatile.

Options Trading Strategies in a Stable Market

Volatile market trading strategies are appropriate when the investor believes the market would move but does not have an opinion on the direction of the movement of the market. As long as there is significant movement upwards or downwards, these strategies offer profit opportunities; an investor need not be bullish or bearish. He must simply be of the opinion that the market would be volatile; this market outlook is also referred to as “neutral volatility”.

Options, Futures and learning from the Stock Market

With the introduction of index futures and options many years ago in the stock markets as derivative products, the stock market itself shifted from a single-product market to a multi-product environment. Options quite like futures are leveraged products applied by market participants to manage the risks associated with the underlying market. It is for the investors both individual and institutional to take it upon themselves to learn and understand the risks and returns associated with such derivative financial instruments.

National Stock Exchange, India: Futures & Options List

The purpose of this webpage is to make the individual investor aware of the 235 stocks which are available for transactions in the futures and options segment of the stock market. The futures and options segment is an integral part of the stock market; and as investors would be aware carry a higher factor of risk. The stocks have been listed in alphabetic order for convenience, starting from the left column and working their way through towards the columns to the right side.

Investment World and Reflections

With the recent advances in investment theory and practice, we have seen the advent of new products, strategies and investment assets.

Creating a Business Strategy

On a scale of one to ten, having a good business strategy for your investments and its management rates about a fifteen! No matter what kind of businesses you have in your portfolio - whether they sell products or a service. If you fail to plan your investments, then you're really planning to fail.

Checklist for starting a Business

After having created a business strategy, the investor would then be required to have at hand a checklist, mainly to minimize errors during the process of setting up the business. Think of this as your business road map.

Formation of an Investment Club

As individual investor we are in a minority in the vast stock markets and in fact any other market. However, collectively we are a force to be reckoned with in the very same stock market.

The Links Page

The internet or the world wide web has millions of websites on investment management and allied fields of study. We have put together links to other websites which we expect would be relevant to your search and investigation.

Search Results

The main reason for the publication of this web page, is to enable you (the reader) to search the web without leaving our websites.

Investment Management Thoughts and Views

The author and editor of this website and its associate websites, has been giving answers at various social networking sites and forums on the nuances of investment analysis and portfolio management and allied subjects. These answers are owned by him and duly copyrighted to him as well. As the visitors of our websites may not have direct access to these answers, thoughts and views expressed by the author; it has been thought appropriate and decided to make these answers along with the questions available to our visitors here.

Privacy Policy

The privacy of our visitors is important to us. At Narach Investment, we recognize that privacy of your personal information is important. Here is information on what types of personal information we receive and collect when you use/visit our website and its various web pages, and how we safeguard your information. We never sell your personal information to third parties.

Disclaimer

This website and all its web pages are academic in nature and free to be viewed by all visitors. The information contained in this website is for general information purposes only. The information is provided by Narach Investment and whilst we endeavor to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.

Disclosure

Unless otherwise expressly stated, you should assume that all references (through the display of image and/or text links) to products and services on this website and all its webpages owned by Narach Investment are made because material connections exist between the website’s owner ("Owner") and the providers of the mentioned products and services ("Provider") through the Google Affiliate Network.

Sitemap

We realize that the investor may wish to go directly to a particular page on our website. To facilitate this, we have prepared a sitemap.

Narach Investment on WAP Browser

The main reason for the publication of this website, is to make you (the reader) aware of the investment world and how to manage your way around it through our website; which has also been made accessable through WAP Browsers for your convenience.

Narach Investment Blog

It is our endeavor to make you (the reader) aware of the investment world and how to manage your way around it through our website. And also what the investment advisors are expected to explain to you.

Narach Philosophy

The main reason for the publication of this website, is to make you (the reader) aware of the Mimansa, a study of the secret of the sacred books of the Hindus; that is the Vedas. Mimansa means a reverent study leading to a scientific quest of truth. This search for truth leads us to the solution of the great problems of life, and has engaged us for thousands of years. The real problem of life is the attainment of happiness and the avoidance of misery and pain. Our ancestors before us have reflected and contemplated on these aspects of life and realized that pleasure is but a passing phase in an endless stream of pain. They concluded that, permanent happiness can only be attained with the total extinction of pain.

Narach Philosophy Blog

It is our endeavor to make you (the reader) aware of the Mimansa, a study of the secret of the sacred books of the Hindus; that is the Vedas. Mimansa means a reverent study leading to a scientific quest of truth.

Narach

The main reason for the publication of this website, is to create a holding website for the other websites and sub domains we have at present and would create in the future with relevant content and web resources to suite the needs and requirements of the visitors of our websites.

Narach Finance

The main reason for the publication of this website, is to make you (the reader) aware of the world of finance and how to manage your way around it. We expect, that after studying the material given on the various web pages of our website listed below, you would be more aware and better prepared with respect to your financial goals and objectives and decisions you would take in this regard. Many people who wish to start their own business need an injection of financial capital at the beginning of a business; the main source of funding for entrepreneurs is business loans.