Financial Market Concepts and Principles

Investment Management identifies and manages risk in financial markets, with an aim of maximizing return. The term ‘investment’ is broadly used to refer to any financial activity involving funds, including trading, buying and selling, borrowing, investment, and saving. Investing refers to making or repaying an expense with the intention of gaining more money in the future. Investment management therefore is the discipline that oversees investment-related decisions. This management strategy is used to ensure maximum gains for all stakeholders, while minimizing risk.

Investment management refers to financial strategies and practices that minimize risk in allocating capital to secure future needs. Most commonly, it involves the identification, measurement, allocation, protection, and distribution of risks and rewards associated with financial assets. Investment management is therefore the professional skill of managing various financial assets, including stocks, securities, bonds, equities, property, and other financial assets, for the advantage of other investors. In addition, this management includes the preparation and implementation of policies designed to minimize financial risk by maintaining appropriate levels of interest risk, credit risk, asset risk, price risk, and volatility. Investment managers are therefore key people involved in the process of investment management.

An investment manager is the one who manages the overall investment portfolio, acting on behalf of his clients. The main objectives of the manager include the creation of a portfolio that will earn a profit while at the same time minimizing the loss of investment capital through possible losses and maximizing the potential for earning a profit on certain investments. These objectives can be attained by adjusting the size of the holding, the type of holding, and/or the period of time for which the investment portfolio is allowed to accumulate value. A good manager will thus be able to achieve two objectives maximizing return on investment and minimizing loss.