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Questions and Answers
What is characterized as high risk taken with the expectation of high and quick returns?
Which type of investment involves tangible assets used in production?
What factors should an investor analyze before making an investment decision?
What is the best definition of passive investing?
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Which investment option represents a claim over real assets?
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What is the primary purpose of an efficient market?
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What distinguishes direct investing from indirect investing?
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Which of the following is NOT a recognized investment option?
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What is a key distinction between investment and speculation?
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Which principle should be prioritized during portfolio construction?
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How does market efficiency impact investment strategies?
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What is a significant feature of equity shares that investors should consider?
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Which of the following statements best describes fundamental analysis?
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Which strategy aligns with technical analysis in investment?
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What is one common misconception about speculation?
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What does a well-grounded investment strategy entail?
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What is the primary distinction between active and passive investing?
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In the context of mutual funds, which factor does NOT influence the overall investment cost for the investor?
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What is a characteristic of indirect investment in a fund?
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Which statement best describes the impact of management fees on an investment portfolio?
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Which investment strategy requires an investor to frequently adjust their holdings based on market conditions?
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What is typically a characteristic of market efficiency?
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Which approach to investing most directly focuses on the intrinsic value of an asset?
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What role does portfolio management play in an investment strategy?
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Study Notes
Investment Overview
- Investment involves allocating current funds to generate future returns.
- Types of investment include Real Investment (tangible assets like machinery and land) and Financial Investment (claims over real assets such as stocks, bonds, and debentures).
Investment Considerations
- Key factors for investment decisions: return, risk, liquidity, marketability, tax benefits, inflation hedging, and capital safety.
- Speculation involves taking higher risks for the potential of quick and substantial returns.
Investment Environment
- Comprises securities, the securities market, and intermediaries.
- Investment options include equities, bonds, debentures, T-bills, mutual funds, Public Provident Fund (PPF), Equity Linked Saving Scheme (ELSS), and financial derivatives.
Modes of Investing
- Two main approaches: Direct Investing (investors buy and sell securities themselves) and Indirect Investing (investing in funds, ETFs, or other financial instruments).
Passive vs. Active Investing
- Passive investing involves buying and holding investments like index funds or ETFs without frequent trading.
- Active investing: requires continuous buying and selling with a goal of outperforming the market.
Costs of Investing
- Mutual funds and similar investment options involve management fees and other costs that impact net returns.
- Understanding these costs is essential for evaluating overall investment performance.
Principles of Investment
- Investments must be well-planned and grounded.
- Differentiating between investment, speculation, and gambling is crucial: investment focuses on informed decision-making, while speculation is often based on trends or luck.
Key Investment Products
- E.L.S.S (Equity Linked Savings Scheme): A tax-saving investment scheme that invests primarily in equities.
- ULIP (Unit Linked Insurance Plan): Combines insurance and investment, allowing policyholders to invest in various funds.
- REITs (Real Estate Investment Trusts): Allow individuals to invest in income-generating real estate without owning physical property.
Selection Criteria for Investments
- Factors to consider when selecting investments include risk tolerance, investment goals, market conditions, and the performance history of the asset.
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Description
This quiz covers key concepts of investment, including types such as real and financial investments. It delves into the factors influencing investment decisions and explores various modes of investing. Gain insight into the investment environment, including securities and market intermediaries.
