Khoe, Sean Hanjaya Prasetya

BMI - 10315038

SUMMARY CHAPTER 1-3

INVESTMENT MANAGEMENT

Real assets used to produce goods and services such as: properties, human capital, land,
and machines. While financial assets are sheets of papers and computed entries, such
as: income statement, financial statement, stocks, bonds, etc.
Three major financial assets are stocks or equities, bonds or fixed income, and money
market instrument or cash equivalent
Stock is a share of ownership of a company. So it represent the number or percentage
of ownership in a company where the holder we call it stock or share holder. In this
financial assets there is preferred stock which well known in Indonesia as saham
preferen. The unique or characteristic of this stock is that it has maturity day or jatuh
tempo in Indonesia terms.
While based on www.Investopedia.com, the definition of bonds is a debt investment in
which an investor loans money to an entity (typically corporate or governmental) which
borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds
are used by companies, municipalities, states and sovereign governments to raise
money and finance a variety of projects and activities. Owners of bonds are debtholders,
or creditors, of the issuer.
Money Market Instrument are more like notes which consist of T-bills, commercial
paper, certificate of deposit, bankers acceptance, Eurodollars, repos and reserves, and
broker funds.
T-bills or Treasury bills:
- Government issued bond (up to 30 years), while note (up to 10 years).
Certificate of Deposit (CD):
- Deposit in bank, cannot be withdrawn on demand
- Can be withdrawn on certain or fixed long term
- If deposit larger than $100.000 then you negotiate to cash before maturating date
- Maturity usually 3 months or more
Commercial Paper:
- Issued by large companies as unsecured debt notes.
 Khoe, Sean Hanjaya Prasetya
BMI - 10315038

- Maturity can go until 270 days, but most commonly only months.
- Longer than 270 days must register it to Security Exchange Commission (SEC)
- Considerately safe
- Bank-backed
Bankers acceptance:
- Created for commercial trading, ussualy 6 months maturity period
- In Indonesia we call it Aksep
- Usually used on foreign trading
- Very safe, because backed by banks assets and borrowers assets.
- Like T-bills, sell at discount value
Federal funds:
- Customer bank federal reserve bank
- It is like Bank Indonesia, every banks are required to have a certain amount of
money in Federal.
Repurchase agreement and reverse (Repos):
- One night process only (1 night stand)
- Dealers sells government securities investor on overnight basis
- Reverse Repo is the opposite instead of selling, dealer buys, then sell in the next
day.
Primary market vs Secondary market
Primary market
- When you are officially for the first time selling to public (IPO)
- Initial Public Offering or abbreviated as IPO is a state or condition of companies
where they start to officially sell their stock publicly on the stock exchange. In
Indonesia, this term is seems to be like perusahaan terbuka or tbk. The focus of
IPO is to help private companies to get funds they need to expand their businesses.
- Public offerings (IPO/terbuka) registered with SEC
- Private offerings (tertutup) personally not registered under SEC.
Secondary market
- Stocks are already in market
- Exchange happen between buyers directly
- Issuing form doesnt received proceeds, is not directly involved.
 Khoe, Sean Hanjaya Prasetya
BMI - 10315038

Financial market
- Purpose: facilitate low cost investment
- Reduce information cost-associated with investing
- Provide adequate liquidating by minimizing time
Type of markets:
- Direct Search Market (buy from another investor only)
- Brokered Markets
- Dealer Markets
- Auction Markets
Bid price: price at which dealer will buy security
Ask price: price at which dealer will sell security