Investment Principles Training Course

Participants can interpret company accounts and economic conditions relevant to investment pricing.

• Income statements, balance sheets and cash flows connected analytically
• Common-size analysis identifies margin, turnover and capital-structure movements
• Ratio analysis assesses profitability, liquidity, solvency and operating efficiency
• Free cash flow to firm derived from reported accounts
• Inflation, interest rates and growth indicators interpreted for asset pricing
• Central-bank policy transmission traced through yields, currencies and credit

Participants can value bonds and assess their sensitivity to yield and credit changes.

• Cash-flow timelines structure present-value and future-value investment decisions
• Discount factors and annuity formulas value scheduled cash flows
• Bond prices calculated from coupons, principal, yield and settlement conventions
• Yield to maturity distinguished from holding-period return and current yield
• Duration and convexity estimate bond-price sensitivity to yield movements
• Credit spreads, default risk and recovery assumptions affect corporate bond values

Participants can estimate equity value using cash-flow, dividend and market-multiple approaches.

• Dividend discount models estimate intrinsic value under stable-growth assumptions
• Free-cash-flow valuation applies FCFE and FCFF forecast approaches
• Comparable-company multiples use P/E, EV/EBITDA and price-to-book ratios
• Enterprise value reconciled with equity value, debt and non-operating assets
• Scenario analysis tests valuation sensitivity to growth, margins and discount rates
• Accounting quality checks identify one-off items and aggressive revenue recognition

Participants can construct diversified portfolios aligned with return objectives and risk constraints.

• Expected portfolio return calculated from asset weights and expected returns
• Variance, covariance and correlation quantify portfolio diversification effects
• Mean-variance optimisation defines efficient portfolios under stated constraints
• Capital market line and security market line interpreted
• Systematic risk estimated using beta and regression output
• Strategic asset allocation aligns risk capacity, tolerance and investment objectives

Participants can assess required returns and evaluate manager performance on a risk-adjusted basis.

• CAPM estimates required return from beta, risk-free rate and premium
• Multi-factor models distinguish market, size, value and momentum exposures
• Alpha separated from factor returns using benchmark-relative performance analysis
• Sharpe, Treynor and information ratios compare risk-adjusted results
• Benchmark selection reflects mandate, asset class and investable opportunity set
• Active return and tracking error governed through risk budgets

Participants can assess derivative instruments used to hedge market, currency and interest-rate exposures.

• Forward contracts priced using spot, carry, income and financing rates
• Futures margining, daily marking-to-market and basis risk explained
• Options payoffs mapped for calls, puts, spreads and protective hedges
• Put-call parity links option prices, strikes, rates and underlying values
• Interest-rate swaps exchange fixed and floating cash-flow exposures
• Hedging ratios set using exposure size, contract specifications and correlation

Participants can identify investment risks and establish controls, limits and escalation arrangements.

• Risk register separates market, credit, liquidity, operational and legal exposures
• Value at Risk interpreted alongside stress tests and expected shortfall
• Liquidity risk measured through bid-ask spreads, depth and redemption terms
• Counterparty limits incorporate probability of default, exposure and collateral
• Concentration limits control issuer, sector, country and currency exposures
• Investment governance assigns authority, segregation, escalation and oversight responsibilities

Participants can compare asset classes and set portfolio rules for allocation and rebalancing.

• Asset-class characteristics compared across equities, bonds, cash and real assets
• Private equity, real estate and commodities assessed for liquidity constraints
• Currency exposure measured and hedged using forwards and policy bands
• ESG materiality incorporated through exclusions, integration and stewardship choices
• Rebalancing rules use tolerance bands, cash flows and transaction costs
• Investment policy statements specify eligible assets, limits and review cycles

Participants can report investment performance, explain results and present evidence-based recommendations.

• Performance attribution separates allocation, selection and interaction effects
• Time-weighted and money-weighted returns selected for appropriate reporting
• Fees, taxes and transaction costs incorporated into net return analysis
• Investment committee reports present mandate compliance, risks and performance
• Recommendation memos document assumptions, valuation evidence and downside cases
• Personal application plan schedules data, decisions and stakeholder actions