Table of Contents
Chapter 1 The Basics 9
What Is a Stock? 9
Why Invest in Stocks? 12
Buying the Business, Not the Stock 14
Taking the Long View 16
Chapter 2 Establishing a Plan 21
Investment Goals 21
Investment Strategy 23
Risk and Reward 27
Types of Risk 30
The Traps of Trading-Your Biggest Risk 34
Chapter 3 Finding and Understanding Information 35
Where to Find Reliable Information 36
Finding Information on the Internet 36
Which Numbers Are Important? 42
Understanding Indexes and Their Importance 43
How to Use a Stock Screen 44
Chapter 4 Financial Statements 49
Company Reports (Financially) Tell All 50
Three Main Financial Statements 51
Accounting Definitions 51
The Balance Sheet Must Balance 52
The Income Statement Is Home to the Bottom Line 55
Statement of Cash Flows Tracks Cash In and Out 58
Chapter 5 Types of Stocks 63
Growth Stocks 63
Value Stocks 66
Core Stocks 70
Size Matters in Stocks 72
Stock Sectors 74
Chapter 6 Stock Price versus Stock Value 79
No Clear Answers on Stock Prices 79
How Daily Stock Prices Are Set 80
Price and Value Are Not the Same 81
Intrinsic Value Determines Potential Success 82
Analyzing a Company's Economic Moat 83
The Next Step: Analyzing the Business 88
Using Ratios in Analysis 89
Intrinsic Value Using Discounted Cash Flows 92
Alternative to Discounted Cash Flow Method 95
Chapter 7 When to Buy or Sell 99
Don't Follow the Crowd 100
Don't Follow the Buyers 101
Don't Follow the Sellers 101
A Planned Approach to Buying and Selling 103
When to Buy Different Types of Stocks 106
Have a Plan to Sell Stocks 108
Taxes and Investing 110
Chapter 8 Building a Portfolio 115
Understanding Asset Allocation 115
Those Other Two Asset Classes: Fixed Income and Cash 117
Timing Is Everything 119
How to Build a Portfolio That Fits You 120
Portfolio Models 122
Chapter 9 Buying Stocks: DIY or Professional Help? 131
How the Stock Market Works 132
Your Investing Options 134
The World of Stockbrokers 134
Full-Service Brokers 135
Discount Brokers 137
DIY/Online Brokers 139
Financial Planner/Adviser 140
Financial Adviser vs. Financial Planner 141
Which Broker Type Is Right for You? 142
Opening a Brokerage Account 142
Types of Accounts 144
Stock Market Orders You Should Know 146
How to Keep Investing Expenses Low 149
What You Do When Things Go Badly 150
Chapter 10 Avoiding Mistakes, Traps, and Schemes 153
Common Investing Mistakes and How to Avoid Them 153
Some Other Investing Mistakes 161
Index 167
