INVESTMENT AND PORTFOLIO There are primarily three types of securities:

MANAGEMENT 1. equity—which provides ownership rights

to holders;
LESSON 1: SECURITY ANALYSIS 2. debt—essentially loans repaid with
periodic payments; and
BRIEF INTRODUCTION 3. hybrids—which combine aspects of debt
• Stock exchange constitute the primary and equity.
institution of the secondary market. Public sales of securities are regulated by
• The stock exchange is the key institutions, the SEC.
facilitating the issues and sales of various
types of securities. It is a pivot around which TYPES OF INVESTMENT SECURITIES
activity of the capital market revolves. In the PICTURE
absence of stock exchange, people with
savings would hardly invest in corporate
securities for which there would be no TRADITIONAL INVESTMENT SECURITIES
liquidity. (buying and selling facility) 1. GOLD
Corporate investment from the public would • It is the earliest form of investment from a
have been lower. time when none of the developed
• Stock exchange thus represent the market investment markets were available for the
place for buying and selling of securities investors.
and enduring liquidity to them in the interest • It was used as an alternative to money in
of the investors. The stock exchange are ancient times and was being started used
virtually the nerve center of the capital as an investment when its demand-supply
market and reflect the health of the balance got disturbed. Central banks and
country's economy as a whole. the International Monetary Fund have a
great role to play in determining gold prices.
CONCEPT OF SECURITIES
• SECURITY ANALYSIS is about valuing 2. Real Estate
the assets, debt, warrants, and equity of • Purchasing, developing, operating,
companies from the perspective of outside maintaining, selling, and renting real estate
investors using publicly available properties has been and is one of the
information. traditional forms of investment.
• Security Analyst must have a thorough • The reason behind investing in real estate
understanding of financial statements, is to gain in the form of rentals (which is like
which are an important source of this regular cash flow for managing day to day
information. Such abilities are: operating expenses) and to gain from price
❑Value equity securities that requires cross rise (benefit for holding the property for long
disciplinary knowledge in both finance and term).
financial accounting. PICTURE

What Is a Security? 3. 3 – Commodities

• The term "security" refers to a fungible, • Commodities were used as an investment
negotiable financial instrument that holds to gain from the demand and supply
some type of monetary value. mismatch as these are seasonal. The main
costs incurred are storage costs, and the
gain arrives from convenience yield. • Registered Securities – certificates bearing
the name of the holder are issued. A person
MODERN INVESTMENT SECURITIES does not automatically acquired legal
1. Fixed Income Bearing Securities ownership by having possession of the
• Those securities which will generate fixed certificate.
cash flow either by way of interest • Divided and Undivided Security
(particularly on debentures/bonds) or by
way of a fixed percentage of dividend (in the 3. Preferred Stock
case of preference shares) are considered • Preferred Stock is the stock the holders of
as fixed income bearing securities. Return which carry preferential rights over common
on these securities would not be affected by stock or equity in two circumstances:
any market factors. Lower risk is involved in -​ Payment of dividend, i.e., these
such types of securities. stockholders get a fixed rate of
dividends and get paid before any
2. Debentures/Bonds dividend is paid to the common
• These are long-term investment options stockholders.
carrying fixed income based on the rate of -​ In the event of liquidation, these
interest. The risk of such types of securities shareholders have preferential rights
is dependent on the type of issuer. The of payment of capital before
major risk faced is the credit risk of the anything is distributed to the
issuer of these securities. common stockholders, but after
• Various investment alternatives are debenture and bondholders.
available under this category:
-​ Government Securities 4. Variable Income Bearing Securities
-​ Debentures of Private Sector -​ Securities other than fixed income
companies bearing securities are considered
-​ Public sector unit (PSU) bonds variable income- bearing securities.
Return on these securities is not
TYPES OF SECURITIES fixed and varies because of the ch
Securities that are represented in paper 5. Equity
(physical) from are called certificated -​ Common stockholders are the
securities. They may be bearer or owners of the company. It means
registered. such stockholders have ultimate
• Bearer Securities - are completely rights over the profits and assets of
negotiable and entitled the holder to the the company. Income on such stock
rights under the securities (e.g. payment if it is variable depending on the risk,
is a debt securities, and voting if it a equity rate of return, liquidity, growth,
security) marketability, etc. Such investments
They are transfers by delivering the are riskier as well as more liquid
instrument from one person to person. investments. These investment
✓ Transfer by endorsement securities can easily be traded in
✓ Signing back of the instrument, and primary as well as secondary
delivery markets.
6. Mutual Funds the stock exchange issue securities to
-​ It is a fund created to invest in existing shareholders on rights basis, it has
various equity or debt securities or a to list such rights issues on the concerned
mix of both and funded by its stock exchange.
unit-holders. Unitholders are the 4. LISTING OF BONUS SHARES - Shares
investors who are the ultimate issued as a result of capitalization of profit
owners of the mutual fund. The idea through bonus issue shall list such issues
is to diversify risk as the risk gets also on the concerned stock exchange.
diluted by investing in a portfolio 5. LISTING FOR MERGER OR
rather than in a single stock. AMALGAMATION

LISTING OF SECURITIES BENEFITS OF LISTING

LISTING – means the admission of a • The ff benefits are available when
company’s securities to trading on a stock securities are listed by a company in the
exchange stock exchange
• The prices at which the securities are • Public image of the company enhanced
traded in the stock exchange are published. • The liquidity of the security is ensured
• Listing of securities with stock exchange is making it easy to buy and sell.
a matter of great importance for companies • Tax concessions are made available both
and investors because they provide the to the investors and the companies
liquidity to the securities in the market. • Listing procedures compels company
• While the price trends in respect of management to disclose important
UNLISTED SECURITIES are seldom known information to the investors enabling them
to the investors and the contract the seller to make decisions with regards to keeping
and the buyer or disposing of securities.
• takes places between place mostly on one
to one basis. LEGAL PROVISION OF LISTING
• Only public companies are allowed to list • Republic Act No. 8799
their securities in the stock exchange • THE SECURITIES REGULATION CODE
• Private Limited companies cannot get • Sec2 Declaration of State Policy - The
listing facility. state shall establish a socially conscious
free market that regulates itself, encourage
TYPES OF LISTING CATEGORY the widest participation of ownership in
1. INITIAL LISTING - If shares or securities enterprises, enhance the democratization of
are to be listed for the first time by a wealth, promote the development of the
company on a stock exchange is called capital market, protect investors, ensure full
initial listing and fair disclosure about securities.
2. LISTING FOR PUBLIC ISSUE - When a Minimize if not totally eliminate insider
company whose shares are listed on a trading and other fraudulent or manipulative
stock exchange comes out with a public devices and practices which create
issue of securities, it has to list such issue distortions in the free.
with the stock exchange.
3. LISTING FOR RIGHTS ISSUE - When The Wall Street Crash of 1929, also known
companies whose securities are listed on as the Great Crash or the Crash of '29, was
a major American stock market crash that ➢ Risk management
occurred in the autumn of 1929. It began in ➢ Portfolio management
September, when share prices on the New
York Stock Exchange (NYSE) collapsed, LISTING OF SECURITIES
and ended in mid November. FUNDAMENTAL ANALYSIS
• Relates to an examination of the intrinsic
THE STOCK MARKET CRASH OF 1929 worth of the company.
AND • Intrinsic worth is the real worth of the
THE GREAT DEPRESSION company shares price; Calculated by
• What caused the stock market crash in dividing the net assets by the number of
1929? equity shares OUTSTANDING.
• There were many causes of the 1929 TECHNICAL ANALYSIS - of the market is
stock market crash, some of which included base in some basic tenets
overinflated shares, growing bank loans, - that all fundamental factors are discounted
agricultural overproduction, panic selling, by the market and are reflected I prices
stocks purchase on margin, higher interest - The prices move in trends or waves which
rates, and a negative media industry. can be both upward and downward
depending on sentiments, psychology
OBJECTIVE OF SECURITIES ANALYSIS emotions or operators or traders.
• Regular Income - The present trends are influenced by the
• Capital Appreciation past trends and the projection of future
• Safety of capital trends is possible by an analysis of past
• Liquidity price trends.
• Hedges against Inflation

PORTFOLIO MANAGEMENT
• Entry Level portfolio management position
are filled by
• college graduates
• Major in business administration,
marketing, economics, accounting, or
finance.

Analyst undergo training in complexities of

securities analysis
Financial Analyst – encourage to obtain
Chartered Financial Analyst (CFA)
designation.
4 yrs. experience applicable experience
Passed the essay exams required extensive
knowledge to many fields like
➢ Accounting
➢ Economics
➢ Security valuation