Quick answer: Investors decide where to put money by weighing expected return and yield against risk and safety of capital, how quickly they can get their money back (liquidity and maturity), how often they receive income, the effect of inflation on real returns, and the tax benefits available. Group Factors Reward Return on investment, yield,
9 Key Factors Affecting Investment Decisions of Investors Read More »
Quick answer: Portfolio revision means changing the mix of securities in a portfolio to keep it in line with the investor’s return goals and risk level. It is needed when the investor’s circumstances or the market change. Strategies are active (frequent, forecast-based) or passive (rule-based). Formula plans such as constant rupee value, constant ratio, variable
Portfolio Revision: Meaning, Objectives, Need, Strategies and Formula Plans Read More »
Quick answer: Arbitrage Pricing Theory, developed by Stephen Ross in 1976, says an asset’s expected return depends on its sensitivity to several macroeconomic risk factors rather than to the market alone. The five factors identified by Burmeister, Roll and Ross are confidence risk, time-horizon risk, inflation risk, business-cycle risk and market-timing risk. Factor Meaning Confidence
Top 5 Risk Factors in Arbitrage Pricing Theory (APT) Read More »
Quick answer: The Capital Asset Pricing Model (CAPM), developed by William Sharpe, John Lintner and Jan Mossin, says an asset’s expected return equals the risk-free rate plus its beta times the market risk premium. For example, with a 7% risk-free rate, a 12% expected market return and a beta of 1.2, the required return is
Capital Asset Pricing Model (CAPM): Meaning, Formula and Assumptions Read More »
Quick answer: Modern portfolio theory, developed by Harry Markowitz in 1952, assumes that asset returns are normally distributed with stable correlations, investors are rational, risk-averse and want to maximise utility, everyone has the same information at the same time, there are no taxes or transaction costs, investors are price takers who can borrow and lend
10 Key Assumptions of Modern Portfolio Theory Read More »
Quick answer: Bonds can be grouped by issuer: government, municipal, corporate and foreign or Euro bonds; and by features: fixed-income, discount (zero-coupon), premium, convertible, mortgage-backed and high-yield bonds. Government bonds are safest but pay less; high-yield corporate bonds pay more but carry default risk. In India, retail investors can buy government securities directly through RBI
12 Different Types of Bonds: Which Is the Best Investment for You? Read More »
Quick answer: Industry analysis looks at whether an industry is worth investing in. The key factors are past sales and earnings, overall performance, government attitude, labour conditions, product differentiation, cost advantages and economies of scale, share prices relative to earnings, and wider trends in demographics, lifestyles, technology, politics and regulation. Group Factors Performance Past sales
12 Key Factors to be Considered in Industry Analysis Read More »
Quick answer: Mutual funds give small investors professional management, diversification, research, liquidity, convenience, low minimum investments (SIPs from as little as ₹100 to ₹500 a month with many funds) and some tax benefits through ELSS. The downsides for investors are no guaranteed returns, expense ratios and exit loads that reduce returns, and market risk; in
19 Key Advantages and Disadvantages of Mutual Funds Read More »
Quick answer: The main types of mutual funds are equity funds (growth, value, dividend, index, sector and diversified), debt or income funds, money market and liquid funds, gilt funds, hybrid funds, commodity and real estate funds, exchange-traded funds and fund of funds. In India, SEBI’s 2017 categorisation groups schemes into equity, debt, hybrid, solution-oriented and
9 Broad Types of Mutual Funds: Choose Right Mutual Fund Read More »
