What you need to know before you invest is written for the nonprofessional. There are innumerable books that give investment advice, such as when to buy stocks or what stocks to buy, but there are few books that explain in nontechnical language just what the stock market is. What You Need to Know Before You Invest will help you understand how the market works and explain various securities that are popular with individual investors.
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Category: Personal Finance
Author: Rod Davis
Language: English
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Introduction- What you need to know before you invest
Many people feel intimidated by the stock market. Since they don’t understand how it works, they don’t feel comfortable investing. They think that only professionals can understand the stock marketthose who speak the language of investing. This book should help change that perception. There are innumerable books that give investment advice, such as when to buy stocks or what stocks to buy, but there are few books that explain in nontechnical language just what the stock market is. What You Need to Know Before You Invest will help you understand how the market works and explain various securities that are popular with individual investors. It is written for the nonprofessional. You will find it much easier to understand than most other books on the stock market, and it will help you to feel more comfortable with the investment process.
I have been teaching about the stock market for twenty years and have examined hundreds of texts and books on the subject. In spite of the voluminous amount of material on investing, I have still to find one book that adequately introduces all aspects of investing to an individual who does not already have some background information. Most college texts are written for students who are in a business or finance program, and those who are not specializing in these areas generally find the material difficult to comprehend. Most books for the general population are written by professionals who cannot (or will not) bring the material down to the level of the ”common man.” This is truly unfortunate. Basic information on the stock market is not difficult to understand. There is, however, a scarcity of nontechnical information on the stock market for individual investors.
In any free enterprise economic system, an individual’s ability to participate in stock market investing is a right. Indeed, the stock market exists because of this economic state. It is not the symbol of a free market system, it is the free market system. The word free implies that everyone is free to participate, not just business professionals. So, everyone should avail themselves of some fundamental information about investing. Your ability to capitalize on money-making opportunities should be limited only by the amount of your finances, not by your lack of knowledge. Fundamental information about stock market investing should be presented so that everyone can understand it. Everyone should have access to the education they need to capitalize on investment opportunities, without having to get a college degree in business or economics.
As an instructor, I have heard the same questions asked year after year: What exactly is a stock? Why do stock prices go up and down? Is the stock market risky? How are my rights as an investor protected?, and so on. Even for individuals who have invested in the stock market for years, some fundamental questions have never been adequately answered. So, here is a book that answers them.
This book was written so that it could be understood by those who use the business section of the newspaper for lining the garbage can or the bottom of the bird cage. However, it will also provide the seasoned investor with a foundation he or she may have never established. It will explain fundamental terms and give you a thorough working knowledge of the most popular areas of investing.
When you finish this book, not only will you be able to read the business section, but you will be able to use the information as well. Then, if you are interested in learning more, you will have no problem comprehending other books that pick up where this one leaves off.
Table of Contents- What you need to know before you invest
Chapter 1- What Is the Stock Market? 1
What Is the Dow Jones Industrial Average? 6
How Do You Read Market Quotes in the Newspaper? 12
Should You Invest in the Stock Market? 15
How Do You Know When to Buy or Sell? 18
Do You Know What You Need to Know? 23
Chapter 2- What Is a Stock? 27
How Do Companies Sell Shares of Stock? 30
What Are Your Rights As a Shareholder? 32
Is the Stock Market Risky? 37
Do You Know What You Need to Know? 41
Chapter 3- How Do You Open a Brokerage Account? 44
How Do You Select a Broker? 48
How Do You Make an Investment? 50
How Can You Make Money When Stocks Go Down? 58
How Do Companies Pay Dividends? 61
Do You Know What You Need to Know? 63
Chapter 4- What Is a Bond? 67
What Are the Different Types of Bonds? 69
What Is Compound Interest? 78
What Are the Risks of Investing in Bonds? 83
How Do You Buy Bonds? 88
Do You Know What You Need to Know? 91
Chapter 5- How Do You Read Financial Statements? 94
What Can You Learn from Financial Statements? 102
Why Are Financial Ratios Important? 109
Do You Know What You Need to Know? 112
Chapter 6- What Is Fundamental Analysis? 116
What Are Economic Cycles? 119
How Do You Measure Inflation? 126
What Is the Biggest Economic Problem Today? 132
Do You Know What You Need to Know? 134
Chapter 7- What Is Technical Analysis? 138
How Do You Read Stock Charts? 139
What Are Some Other Technical Indicators? 143
What Is a Contrarian, and Should You Be One? 147
How Do You Use Market Timing Techniques? 148
Do You Know What You Need to Know? 151
Chapter 8- What Is a Mutual Fund? 155
What Does It Cost to Buy Mutual Funds? 157
What Types of Mutual Funds Are Available? 163
How Do You Select a Mutual Fund? 168
What Are Closed-End Funds and Unit Trusts? 171
Do You Know What You Need to Know? 174
Chapter 9- What Are Stock Options? 178
What Happens When You Buy Options? 184
What Happens When You Sell Options? 188
What Are Some Other Option Strategies? 190
What Are Stock Rights and Warrants? 193
What Are Commodity Futures Contracts? 195
Do You Know What You Need to Know? 198
Chapter 10- How Are Your Rights as an Investor Protected? 202
What Have We Learned from Previous Market Crashes? 204
What Is the National Association of Securities Dealers? 210
Do You Know What You Need to Know? 213
Chapter 11- What Are the Tax Consequences of Investing? 216
Should You Have an IRA? 219
What Is an Annuity? 224
What Are Limited Partnerships? 228
Do You Know What You Need to Know? 232
Chapter 12- What Changes Are Coming to the Securities Markets? 236
How Will Computers Change the Way You Invest? 243
What Recent Events Will Affect the Economy in the Future? 249
Do You Know What You Need to Know? 260
Appendix
How Do You Calculate Interest Rates? 264
Glossary 272
Recommended Reading 295
Index 296
About the author
Rod Davis won an Emmy Award as Instructional Designer for the college telecourse Dollar$ & Sense: Personal Finance for the 21st Century. The telecourse consists of 26 half-hour programs that are broadcast on Public Television stations or on cable channels and is offered through colleges or other organizations. Mr. Davis wrote the Student Guide for the telecourse. Additionally, he has been a Financial Advisor with a major securities firm in Long Beach, CA since 1979. Mr. Davis has also been a college instructor on finance and investing since 1981. Prior to that he headed the Operations Departments at the branch offices of two securities firms, giving him over 25 years of experience in the securities industry.
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