The investor takes a number of decisions in the process of investment. He has to decide the risk tolerance level and the nature of assets to be purchased. Once he decides to kind of assets, he will select from the alternatives. The selection of the security is guided by his risk tolerance, expected return and the investment horizon. He analyses the risk return characteristics of holding a particular company’s stock for a particular period. It should be noted that the selection of equity is ore tedious as compared to bonds because equity shares do not carry a fixed rate of dividend and the payment of dividend is at the discretion of the board of directors. Again the earning and dividends on equity shares are expected to grow unlike fixed income securities.