Stock Investing For Dummies

Title Page
Copyright Page
Table of Contents
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Part 1 The Essentials of Stock Investing
Chapter 1 Surveying the World of Stock Investing
Understanding Investment Basics
Preparing to Buy Stocks
Knowing How to Pick Winners
Recognizing stock value
Understanding how market capitalization affects stock value
Sharpening your investment skills
Chapter 2 Taking Stock of Your Current Financial Situation and Goals
Establishing a Starting Point by Preparing a Balance Sheet
Step 1: Make sure you have an emergency fund
Step 2: List your assets in descending order of liquidity
Step 3: List your liabilities
Step 4: Calculate your net worth
Step 5: Analyze your balance sheet
Funding Your Stock Program
Step 1: Tally up your income
Step 2: Add up your outgo
Step 3: Create a cash flow statement
Step 4: Analyze your cash flow
Another option: Finding investment money in tax savings
Setting Your Sights on Your Financial Goals
Chapter 3 Defining Common Approaches to Stock Investing
Matching Stocks and Strategies with Your Goals
Investing for the Future
Skipping stocks for the short term
Considering intermediate-term goals
Preparing for the long term
Investing for a Purpose
Making loads of money quickly: Growth investing
Steadily making money: Income investing
Distinguishing between dividends and interest
Recognizing the importance of an income stock’s yield
Investing for Your Personal Style
Conservative investing
Aggressive investing
Chapter 4 Recognizing Risk and Volatility
Exploring Different Kinds of Risk
Financial risk
Interest rate risk
Hurting a company’s financial condition
Affecting a company’s customers
Impacting investors’ decision-making considerations
Hurting stock prices indirectly
Market risk
Inflation risk
Tax risk
Political and governmental risk
Personal risk
Emotional risk
Paying the price for greed
Recognizing the role of fear
Looking for love in all the wrong places
Getting the Scoop on Volatility
Minimizing Your Risk
Gaining knowledge
Staying out until you get a little practice
Putting your financial house in order
Diversifying your investments
Weighing Risk against Return
Chapter 5 Stock Investing through Exchange-Traded Funds
Comparing Exchange-Traded Funds and Mutual Funds
The differences
The similarities
Choosing an Exchange-Traded Fund
Bullish ETFs
Major market index ETFs
ETFs related to human need
ETFs that include dividend-paying stocks
Bearish ETFs
Taking Note of Indexes
Part 2 Before You Start Buying
Chapter 6 Gathering Information
Looking to Stock Exchanges for Answers
Grasping the Basics of Accounting and Economics
Accounting for taste and a whole lot more
Understanding how economics affects stocks
Getting the hang of the basic concepts
Gaining insight from past mistakes
Staying on Top of Financial News
Figuring out what a company’s up to
Discovering what’s new with an industry
Knowing what’s happening with the economy
Seeing what politicians and government bureaucrats are doing
Checking for trends in society, culture, and entertainment
Reading (And Understanding) Stock Tables
52-week high
52-week low
Name and symbol
Dividend
Volume
Yield
P/E
Day last
Net change
Using News about Dividends
Looking at important dates
Understanding why certain dates matter
Evaluating Investment Tips
Chapter 7 Going for Brokers
Defining the Broker’s Role
Distinguishing between Full-Service and Discount Brokers
At your disposal: Full-service brokers
What full-service brokers can do for you
What to watch out for with full-service brokers
Just the basics: Discount brokers
What discount brokers can do for you
What to watch out for with discount brokers
Choosing a Broker
Discovering Various Types of Brokerage Accounts
Cash accounts
Margin accounts
Options accounts
Judging Brokers’ Recommendations
Understanding basic recommendations
Asking a few important questions
Calling on Robo-Advisors
Chapter 8 Investing for Long-Term Growth
Becoming a Value-Oriented Growth Investor
Using a Few Handy Tips to Choose Growth Stocks
Looking for leaders in megatrends
Comparing a company’s growth to an industry’s growth
Considering a company that has a strong niche
Checking out a company’s fundamentals
Evaluating a company’s management
Return on equity
Equity and earnings growth
Insider buying
Noticing who’s buying and/or recommending a company’s stock
Making sure a company continues to do well
Heeding investing lessons from history
Chapter 9 Investing for Income and Cash Flow
Understanding the Basics of Income Stocks
Getting a grip on dividends and dividend rates
Recognizing who’s well-suited for income stocks
Assessing the advantages of income stocks
Heeding the disadvantages of income stocks
What goes up . . .
Interest-rate sensitivity
The effect of inflation
Uncle Sam’s cut
Analyzing Income Stocks
Pinpointing your needs first
Checking out yield
Examining changes in yield
Comparing yield between different stocks
Looking at a stock’s payout ratio
Studying a company’s bond rating
Diversifying your stocks
Exploring Some Typical Income Stocks
It’s electric! Utilities
An interesting mix: Real estate investment trusts (REITs)
Business development companies (BDCs)
Covered Call Writing for Income
Writing Puts for Income
Chapter 10 Understanding Technical Analysis for Stock Investors
Comparing Technical Analysis and Fundamental Analysis
Looking under the hood of technical analysis
The price is the be-all and end-all
The trend is your friend
If it happened before, it will happen again
Examining the good and bad of technical analysis
Combining the best of both worlds
Using the technician’s tools
Staying on Top of Trends
Distinguishing different trends
Looking at a trend’s length
Using trendlines
Watching the channel for resistance and support
Getting the Scoop on Technical Charts
Checking out types of charts
Line charts
Bar charts
Candlestick charts
Point-and-figure charts
Picking out chart patterns
Above the rest: The head and shoulders
In reverse: The reverse head and shoulders
Wake up and smell the coffee: The cup and handle
Twice as nice: The double top and the double bottom
Triangles (and I don’t mean in Bermuda!)
Time to cheer: Flags and pennants
Cut it up: Wedges
Watch your step: Gaps
Strength Index
Part 3 Picking Winners
Chapter 11 Using Basic Accounting to Choose Winning Stocks
Recognizing Value When You See It
Understanding different types of value
Market value
Book value and intrinsic value
Sales value and earnings value
Putting the pieces together
Accounting for Value
Breaking down the balance sheet
Answering a few balance sheet questions
Assessing a company’s financial strength over time
Looking at the income statement
Sales
Expenses
Profit
Tooling around with ratios
The P/E ratio
The P/S ratio
Chapter 12 Decoding Company Documents
A Message from the Bigwigs: Reading the Annual Report
Analyzing the annual report’s anatomy
The letter from the chairman of the board
The company’s offerings
Financial statements
Summary of past financial figures
Management issues
CPA opinion letter
Company identity data
Stock data
Going through the proxy materials
Dig Deeper: Getting a Second Opinion
Company documents filed with the SEC
Form 10K
Form 10Q
Insider reports
Value Line
Standard & Poor’s
Moody’s Investment Service
Brokerage reports: The good, the bad, and the ugly
The good
The bad
The ugly
Do It Yourself: Compiling Your Own Research Department
Chapter 13 Emerging Sector and Industry Opportunities
Telling the Difference between a Sector and an Industry
Interrogating the Sectors and Industries
Which category does the industry fall into?
Cyclical industries
Defensive industries
Is the sector growing?
Will demand for the sector’s products and/or services see long-term growth?
What does the industry’s growth rely on?
Does the industry depend on another industry?
Who are the leading companies in the industry?
Is the industry a target of government action?
Outlining Key Sectors and Industries
Robotics and artificial intelligence
E-commerce
Marijuana investing
Commodities
Precious metals
Cryptocurrency opportunities
Chapter 14 Small Cap Stocks, IPOs, and Stock Warrants
Exploring Small Caps
Checking that a small cap stock is making money
Analyzing small cap stocks before you invest
Picking out principles for small cap success
Finding small cap gems
Investigating IPOs
Cashing In on Stock Warrants
Chapter 15 Factor Investing
Surveying the Pros and Cons of Factor Investing
The factor investing pros
The factor investing cons
Breaking Down the Factor Categories
Macro factors
Micro factors
Value
Size
Quality
Low volatility
Dividend yield
Growth
Earnings yield
Volatility
Liquidity
Quality and value
Risk
Environmental, social, and governance (ESG)
Getting into Factor-Based ETFs
Checking Out a Few Factor Investing Examples
Macro factor examples
Micro factor examples
Part 4 Investment Strategies and Tactics
Chapter 16 Discovering Screening Tools
Understanding the Basics of Screening Tools
Choosing the category
Distinguishing min versus max
Setting value ranges
Searching regardless of your entry
Touring a Stock Screening Tool
Before you begin: Selecting your screener
First up: The major categories
The main event: Specific filters
Share statistics
Income
Valuation measures
Dividends and splits
ESG scores
Checking Out an ETF Screening Tool
Asset Class
Attributes
Issuer and Brand
Structure
Expenses & Dividend
Liquidity & Inception Date
Returns
ESG Scores
Fund Flows
Risk Metrics
Holdings
Themes
A Few Final Points to Keep in Mind for Successful Stock Searches
Chapter 17 Understanding Brokerage Orders and Trading Techniques
Checking Out Brokerage Orders
On the clock: Time-related orders
Day orders
Good-til-canceled orders
At your command: Condition-related orders
Market orders
Stop-loss orders
Limit orders
The joys of technology: Advanced orders
Buying on Margin
Examining marginal outcomes
If the stock price goes up
If the stock price fails to rise
Maintaining your balance
Striving for success on margin
Going Short and Coming Out Ahead
Setting up a short sale
Oops! Going short when prices grow taller
Feeling the squeeze
Chapter 18 Investing During a Crisis
Understanding What Happens Before a Crisis
The economy versus the stock market
Total debt and consumption
Taking Action as an Investor When a Crisis Looms
Are your stock selections strong?
Are you using defensive tactics?
Are your stocks in safe categories?
What are some other financial considerations?
Chapter 19 AI Investing
Beginning with AI Basics
AI tools for investors
ChatGPT
AI-enhanced search tools
ChatPDF
Successful prompting
Setting up the scenario
Requesting a style of response
Checking out sample investment prompts
Investing in AI Stocks
Large cap AI stocks
Small cap AI stocks
Investing in AI-Related ETFs
Investing in AI Indirectly
Industries that benefit from AI positives
Industries that benefit from AI negatives
Electric utilities
Cybersecurity
Chapter 20 Keeping More of Your Money from the Taxman
Paying through the Nose: The Tax Treatment of Different Investments
Understanding ordinary income and capital gains
Minimizing the tax on your capital gains
Coping with capital losses
Evaluating gains and losses scenarios
Sharing Your Gains with the IRS
Filling out forms
Playing by the rules
Discovering the Softer Side of the IRS: Tax Deductions for Investors
Investment interest
Donations of stock to charity
Items that you can’t deduct
Taking Advantage of Tax-Advantaged Retirement Investing
IRAs
Traditional IRA
Roth IRA
401(k) plans
Part 5 The Part of Tens
Chapter 21 Ten Indicators of a Great Stock
The Company Has Rising Profits
The Company Has Rising Sales
The Company Has Low Liabilities
The Stock Is at a Bargain Price
Dividends Are Growing
The Market Is Growing
The Company Is in a Field That Has a High Barrier to Entry
The Company Has a Low Political Profile
The Stock Is Optionable
The Stock Is Benefiting from Favorable Megatrends
Chapter 22 Ten Ways AI Can Boost Your Investing Strategies
Providing Basic Investment Education
Offering a Second Opinion
Summarizing Complex Documents
Optimizing Your Portfolio
Helping with Real Estate Investing
Deciphering Your 401(k)
Conducting Fundamental Analysis
Analyzing Market and Economic Sentiment
Assisting with Financial Planning
Creating Useful Calculations
Chapter 23 Ten Investments and Strategies That Go Great with Stocks
Covered Call Options
Put Options
Cash
EE Savings Bonds
I Bonds
Sector Mutual Funds
Bearish Exchange-Traded Funds
Dividend Yield Exchange-Traded Funds
Consumer Staples Exchange-Traded Funds
Reinvestment
Chapter 24 Ten Investing Pitfalls and Challenges for 2024–2034
Trillion-Dollar Pension Shortfalls
Taiwan
The Bond and Debt Bubble
AI Opportunities and Problems
Federal Deficits and Debt
A Social Security and Medicare Reckoning
Conflict and Terrorism
A Potential Currency Crisis
A Derivatives Time Bomb
The Effects of Government Actions
Part 6 Appendixes
Appendix A Resources for Stock Investors
Financial Planning Sources
Certified Financial Planner Board of Standards (CFP Board)
Financial Planning Association (FPA)
National Association of Personal Financial Advisors (NAPFA)
The Language of Investing
The Balance
Investopedia
Standard & Poor’s Dictionary of Financial Terms
Textual Investment Resources
Periodicals and magazines
Books
Special books of interest to stock investors
Investing Websites
General investing websites
Stock investing websites
Stock investing blogs
Other blogs that are useful for stock investors
Investor Associations and Organizations
American Association of Individual Investors (AAII)
National Association of Investors (NAIC)
Stock Exchanges
Finding Brokers
Choosing brokers
Brokers
Fee-Based Investment Sources
Exchange-Traded Funds
Sources for Analysis
Earnings and earnings estimates
Sector and industry analysis
Stock indexes
Factors that affect market value
Economics and politics
Federal laws
Technical analysis
Insider trading
Tax Benefits and Obligations
Fraud
Financial Industry Regulatory Authority (FINRA)
Securities Industry and Financial Markets Association (SIFMA)
Other resources
Appendix B Financial Ratios
Liquidity Ratios
Current ratio
Quick ratio
Operating Ratios
Return on equity (ROE)
Return on assets (ROA)
Sales-to-receivables (SR) ratio
Solvency Ratios
Debt-to-net-equity ratio
Working capital
Common Size Ratios
Valuation Ratios
Price-to-earnings (P/E) ratio
Price-to-sales (P/S) ratio
Price-to-book (P/B) ratio
Appendix C AI Resources and Tools for Stock Investing
Beginners’ Tutorials and Courses on AI
AI YouTube Channels
Books about AI
AI News and Views
User Groups on AI and ChatGPT
AI Resource Compilations
Investing AI Tools
Personal Finance AI Tools
Tax and Budgeting AI Tools
Robo-Advisors
ChatGPT Alternatives
Directories of AI Tools
Other Finance-Specific Tools That Use Generative AI
Index
EULA