Investment Analysis

Investment Analysis Services in Sri Lanka

Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. As such, those shareholders who fail to thoroughly analyze their stock purchases, such as owners of mutual funds, could well be called speculators. Indeed, given the efficient market hypothesis, which implies that a thorough analysis of stock data is irrational, all rational shareholders are, by definition, not investors, but speculators.

Investment is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments.

In economic theory or in macroeconomics, investment is the amount purchased per unit time of goods which are not consumed but are to be used for future production. Examples include railroad or factory construction. Investment in human capital includes costs of additional schooling or on-the-job training.

Inventory investment refers to the accumulation of goods inventories; it can be positive or negative, and it can be intended or unintended. In measures of national income and output, "gross investment" (represented by the variable I) is also a component of Gross domestic product (GDP), given in the formula GDP = C + I + G + NX, where C is consumption, G is government spending, and NX is net exports. Thus investment is everything that remains of total expenditure after consumption, government spending, and net exports are subtracted (i.e. I = GDP - C - G - NX).

Investment is often modeled as a function of Income and Interest rates, given by the relation I = f(Y, r).

An increase in income encourages higher investment, whereas a higher interest rate may discourage investment as it becomes more costly to borrow money. Even if a firm chooses to use its own funds in an investment, the interest rate represents an opportunity cost of investing those funds rather than lending out that amount of money for interest.

The investment decision under economic paradigm differs from that of social or spiritual paradigm. Generally an investor can be of three different types; They are; 1. Risk Taker
2. Risk Averse
3. Risk Avoider

A risk avoider is the one who wants to ensure 100% assurance on the return they get after investing their money. The safest way for such investors in this context is investing on government bonds, or security deposits. This however suffers from serious limitations, in particular if the general public is inclined towards such meticulous measures there would not be any growth in the economy. Higher the interest rate will result in higher the rate of inflation and low rate of economic growth in the country.

Islam is the only religion in the world which thoroughly condoms such interest bearing; risk avoiding investment decisions. In contrast Islam encourages the first one (risk taker) and the second option (risk averse) as far as a guaranteed return in the form of a fixed rate can not be witnessed in either case. This undoubtedly provides the gateway for economic growth and prosperity for individual or country as a whole.

The investment decision (also known as capital budgeting) is one of the fundamental decisions of business management: Managers determine the investment value of the assets that a business enterprise has within its control or possession. These assets may be physical (such as buildings or machinery), intangible (such as patents, software, goodwill), or financial (see below). Assets are used to produce streams of revenue that often are associated with particular costs or outflows. All together, the manager must determine whether the net present value of the investment to the enterprise is positive using the marginal cost of capital that is associated with the particular area of business.

However certain individual or corporate sectors also involve in investing in stocks in the share market. Here again one has to ascertain so many factors before taking a decision in purchasing shares from a public listed company. This again is a specialized area where some full time investment analysts are employed to probe at greater length.

The GIH has done some valuable analysis in this regard which can be of some useful insights for certain investors. We at ICC also provide valuable service to guide the potential investors in so many ways. You may download the pdf file of the GIH investment analysis report updated on a weekly basis for your necessary latest information in this regard.