Investments And Portfolios

Investments and portfolios Name Institution/ Affiliation Introduction In the current business world, investment is a subject that has virtually elicited interest to individuals from all sphere. Today, everybody is running for money as it is considered to be the root of happiness. An investor’s life is characterized by earning and spending of money. Rarely does investor’s income balances their consumption. Therefore, Investment encompasses making present sacrifices with the hope of developing future benefits. According to (Fabozzi & Drake 2009),investment is a commitment of a resource for a specified period to derive future compensation for the time the fund is devoted, uncertainty of upcoming payments and the nature of inflation. The theory of investment can be grouped into either economic investment or financial investment. Economic investment entails the addition of capital stock to the society. Capital stock is commodities used in the creation of other goods and services. According to this concept, investment suggests the development of new dynamic capital such as machinery, portfolios and human capital. On the other hand, financial investment assumes the allocation of monetary capitals to resources expected to generate returns at a given period. It includes the exchange of financial claims such as shares and bond, debentures, fixed deposits, and life insurance policies to generate benefits such as rent, dividends, interests, pension benefits, and appreciation of initial capital value (Sachs & Reid 2006). On the other hand, an investment portfolio is the collection of different kind of investments. Ideally, an investment portfolio is developed to work in coherence to help investors achieve their goals and objectives through a certain degree of diversification. Typically the collection is grouped into stocks, bonds and cash. Further, these portfolios lie sub-assets such as international stocks, mid-cap, small cap and large cap stocks. Moreover, bonds include short term, foreign, intermediate and tax-exempt bonds (Fabozzi & Drake 2009). Assessment of investment environment Investment management process involves managing investment money to generate returns. The method of investment consists in setting investment policy, analyzing and evaluation of investment vehicles, the formation of a diversified investment portfolio, portfolio revision, measurement and evaluation of portfolio performance. The investment environment in a country or a region is a critical element that determines the success of the domestic and foreign investment. According to Sachs & Reid (2006), investment climate is the economic and financial conditions of a region that defines whether financial institutions and individuals are willing to advance money or acquire a stake in the business of a country. Social, financial and economic factors such as infrastructure, capital, political stability, government regulations, property rights a, taxes, crime, poverty and government transparency and accountability, affect the environment of a country. For instance, the unfavorable investment climate is one that is characterized by many challenges that derail development as witnessed in underdeveloped nations. In such countries, regulatory reform and no...