B) Investment Management

Investment management relates to the selection of assets in which funds will be invested by a firm. The assets which can be acquired fall into two broad groups: long-term assets and short-term, or current assets.

Nowadays investors face a lot of choices. Along with stocks and bonds of large companies and government debt securities, investors can now own stocks of small companies, the stocks and bonds of companies headquartered in foreign countries, high-yield bonds, collateralized mortgage obligations, floating-rate notes, swaps, puts, calls, and futures contracts. The list is seemingly endless and it continues to grow. Furthermore, the ability to purchase these securities has become both less expensive and more convenient with the advent of advanced communications and computer networks. The challenge to investors is increasing because the investment environment is becoming more and more complex. With the rapid evolution that the investment industry is undergoing, new securities, markets, investment management techniques have appeared.

When making decisions with regard to what marketable securities to invest in, how big the investment should be, and when the investment should be made, the investor:

• sets investment policy and determines objectives,

• performs security analysis,

• constructs a portfolio,

• revises the portfolio,

• evaluates the performance of the portfolio.

For any type of security, the risk can by reduced by investing in more than one firm. This is called "diversification". An investor with stocks and bonds issued by a number of firms is said to have a diversified portfolio.

Diversification does not eliminate all risks. Events like recession, high interest rates, and so on may depress profits and stock prices of all firms.

Words you may need:

collatcralized mortgage obligation облигация, обеспеченная пулом ипотек

floating-rate note облигация с плавающей ставкой

advent n приход, появление

to construct a portfolio создать портфель

to revise a portfolio пересмотреть портфель

to depress the profits снижать прибыль