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Questions Bank : Discuss Investment Process Essay

Decent Essays

Q.2: DISCUSS INVESTMENT PROCESS.
ANS.: INVESTMENT PROCESS:

1. INVESTMENT POLICY:

The government or the investor before proceeding into investment formulates the policy for the systematic functioning. The essential ingredients of the policy are the investible funds, objectives and the knowledge about the investment alternatives and market.

Investible funds- The entire investment procedure revolves around the availability of investible funds. The fund may be generated through savings or from borrowings.

Objectives- The objectives are framed on the premises of the required rate of return, need for regularity of income, risk perception and the need for liquidity.

Knowledge- The knowledge about the investment alternatives and markets plays a key role in the policy formulation. The investment alternatives range from security to real estate. The risk and return associated with investment alternatives differ from each other.

The investor should be aware of the stock market structure and the functions of the brokers. The mode of operation varies among BSE, NSE and OTCEI. Brokerage charges are also different. The knowledge about the stock exchanges enables him to trade the stock intelligently.

2. SECURITY ANALYSIS:

After formulating the investment policy, the securities to be bought have to be scrutinized through the market, industry and company analysis.

Market analysis- The stock market mirrors the general economic scenario. The growth in gross domestic product

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