Investment — definition?
Current resource commitment for future returns.
Asset allocation — role?
Optimizes portfolio risk and return.
Security selection — process?
Choosing securities within an asset class.
Passive vs active — difference?
Passive mirrors market; active seeks to outperform.
Real assets — examples?
Land, buildings, machinery.
Financial assets — claims?
Income claims or ownership rights.
Financial markets — functions?
Facilitate risk transfer and resource allocation.
Major asset classes?
Money, capital, derivatives.
Money market instruments?
Short-term, liquid debt securities.
Capital market instruments?
Long-term securities like bonds and stocks.
Bond — key feature?
Pays fixed interest and principal at maturity.
Equity — types?
Common and preferred stocks.
Money market — examples?
T-Bills, CDs, commercial paper.
Capital market — examples?
Bonds, stocks, derivatives.
Bond — characteristic?
Subject to interest rate and credit risk.
Stock — ownership?
Shares in a corporation.
Common stock — rights?
Voting and residual claims.
Preferred stock — features?
Fixed dividends, priority in liquidation.
Market efficiency — impact?
Limits active management's ability to outperform.
Financial intermediaries — role?
Channel funds, reduce transaction costs.
Disintermediation — meaning?
Bypassing traditional intermediaries.
Asset allocation — primary driver?
Most influence on portfolio performance.
Security analysis — types?
Fundamental and technical analysis.
Diversification — purpose?
Reduces unsystematic risk.
Answer 12 questions on Introduction to Investment Strategies.
1. What is an investment primarily understood as?
2. Which influential work is Harry Markowitz best known for in the context of asset allocation strategies?
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