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The Complete Idiot's Guide to Investing, 3E

by: DeSalvo, Debra; Koch, Edward T.; Kennon, Joshua

The Complete Idiot's Guide to Investing, 3E

by: DeSalvo, Debra; Koch, Edward T.; Kennon, Joshua

ISBN 13:
9781592574803
ISBN 10:
1592574807
Edition: 3rd
Format: Paperback
Copyright: 02/07/2006
Publisher: DK Publishing, Inc.
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Summary

The Complete Idiot s Guide to Investing, Third Edition , provides investment guidance and information to the ever increasing number of Americans who are looking to secure their future. Topics covered include portfolio objectives, home ownership, college education funding, fixed income investments, and common versus preferred stock.

Part 1: What Does ``Financial Security'' Mean to You?

(68)

Put Your Money to Work for You

(8)

Become an Educated Investor, Not Just a Consumer

(1)

Investing in a Post-Bubble World

(1)

Time, Risk, and Your Sanity

(3)

Do Not Despise the Day of Small Beginnings

(1)

The Big Picture: Keep Things in Perspective

(2)

The Miracle of Compounding

(14)

How Compounding Makes the Difference

(1)

What Is the Time Value of Money?

(1)

The Future Value of a Single Amount

(1)

An Easy Way to Figure the Future Value of a Single Sum

(2)

Present Value of a Single Amount

(1)

An Easy Way to Figure the Present Value of a Single Sum

(2)

Future Value of an Annuity

(1)

An Easy Way to Figure the Future Value of an Annuity

(1)

Present Value of an Annuity

(2)

An Easy Way to Figure the Present Value of an Annuity

(1)

To Eternity and Beyond: Determining the Value of a Perpetuity

(1)

Endless Choices: TVM Derivations

(1)

And Now for a Surprise

(1)

How Do You Really Feel About Risk?

(16)

What Is Return?

(1)

What You Made, What You Paid

(1)

Fear of Heights: The Higher the Return, the Greater the Risk

(1)

The Tools of the Trade

(3)

Standard Deviation and a Podunk Potato

(1)

Deviant Behavior

(1)

The Four Broad Asset Classes

(1)

Variety Is the Spice of Life

(1)

Quiz Thyself to Know Thyself: Risk Tolerance Quiz

(5)

Got the Time? Take the Time Horizon Quiz

(4)

Selecting Your Investing Objectives and Style

(12)

Investing Objectives

(1)

Keeping What You Have: Investing for Capital Preservation

(1)

Show Me the Money! Investing for Current Income

(1)

Jack and the Beanstalk: Investing for Capital Appreciation

(1)

Bet the Farm

(2)

Cheat Sheet

(1)

Dollars for Pennies: The Value Investing Approach

(1)

Weighing Machine vs. Voting Machine

(1)

Margin of Safety

(1)

Jeeves, Sell Me a Business!

(1)

Grabbing Onto the Rocket: The Growth Approach

(1)

Can't We All Be Friends?

(3)

What Do You Have Right Now--and What Will You Need?

(16)

Where Am I Now?

(9)

Your Personal Balance Sheet: A Snapshot of Your Finances

(3)

Get a Grip with a Personal Income Statement

(2)

A Happy Couple on the Right Track

(2)

Your Typical Young Guy Living Hand to Mouth

(2)

Where Am I Going?

(1)

How Am I Going to Get There?

(6)

No Pain No Gain: Calculating What it Will Take in Actual Dollars

(1)

Avoiding Major Mistakes

(4)

Part 2: Creating a Plan

(54)

Retirement Plans 101

(16)

How Gold Do You Want Your Golden Years to Be?

(1)

Defined Benefit Plans

(3)

How the Amount of Your Monthly Pension Is Determined

(1)

A Whole Lotta Lumps or Just One: The Lump-Sum Option

(1)

If Your Employer Drops the Ball

(1)

Defined Contribution Plans

(1)

401 (k) and 403 (b) Plans

(2)

Benefits of 401 (k) and 403 (b) Plans

(1)

Can I Borrow from My 401 (k)?

(1)

What If I Change Employers?

(1)

Contribution Limits

(1)

Should You Put All Your Eggs in the Company Basket? Ask the Folks at Enron

(1)

What About Stock Options? Go for It

(1)

Individual Retirement Accounts

(1)

Old Faithful: The Traditional IRA

(1)

The New Kid on the Block: Roth IRA

(1)

Avoiding the 10 Percent Early Withdrawal Penalty

(1)

Which Type of IRA Is Right for Me?

(1)

Traditional and Roth IRA Contribution Limits

(1)

Solving Debt and Credit Problems

(10)

What Does Your Credit Report Say About You?

(1)

CRA Horror Stories

(1)

How to Check Your Credit Reports

(2)

No Credit Is Not Good Credit

(1)

Debit Cards---A Better Choice?

(1)

The Mysteries of Your FICO Score

(2)

Paying Your Bills on Time (35 Percent)

(1)

Ratio of Debt to Total Credit Limit (30 Percent)

(1)

Length of Credit History (15 Percent)

(1)

New Accounts, Credit Inquiries, and Recent Applications (10 Percent)

(1)

Mix of Credit Cards and Loans (10 Percent)

(1)

Should I Pay Off My Debt or Invest?

(3)

Home Ownership: What You Need to Know

(12)

The Down Payment

(1)

Timing Is Everything

(1)

Re-Fi Mania

(1)

Evaluate Your Mortgage-Worthiness Before a Banker Does

100

(1)

Compare Renting to Owning

100

(1)

Over Time, Owning Should Save You Money

101

(1)

Renting Pluses

101

(1)

How Much of Your Income Should You Spend on Housing?

102

(1)

Fixed Rate vs. Adjustable Rate Mortgage

102

(1)

I.O. for U?

103

(1)

The Costs of Closing

104

(1)

Second Mortgages---Pros and Cons

105

(1)

Pluses & Pitfalls of Paying Off Your Mortgage

106

(1)

Should You Shorten Your Mortgage?

106

(3)

Funding Your Own (or Your Child's) Education

109

(14)

An Investment That Really Pays

110

(1)

Put Your Financial Security First

110

(1)

Establishing an Education Fund

111

(1)

Using a Traditional or Roth IRA to Save for College

112

(1)

Coverdell Education Savings Accounts (ESAs)

112

(1)

Qualified Tuition Programs (Section 529s)

112

(3)

Pros and Cons of 529 Plans

115

(1)

Tax Breaks for Education Expenses

116

(1)

The Hope Scholarship Credit

116

(1)

Lifetime Learning Credits

116

(1)

Mix and Match Carefully

116

(1)

The Education-Loan Interest Deduction

117

(1)

Patriot Bonds (formerly EE Savings Bonds)

117

(1)

Other Options

118

(1)

Sorting Out All the Options

119

(1)

In Whose Name?

120

(3)

Part 3: Investing 101

123

(86)

What Are They Up to On Wall Street, Anyway?

125

(14)

The Purpose of Wall Street

126

(2)

The Primary Market

126

(1)

The Secondary Market

127

(1)

The Players

128

(1)

The Stock Exchanges

128

(1)

What's With All the Animal References?

129

(1)

The Securities and Exchange Commission (SEC)

130

(1)

The Fed's Balancing Act: Dampening Inflation Without Dumping on Us

131

(2)

The Problem with Inflation

131

(2)

Interest Rates and the Market

133

(1)

Buy Side vs. Sell Side

133

(1)

Choosing a Broker

134

(2)

Traditional vs. Discount

134

(1)

Check Out Your Broker's Background

135

(1)

SIPC Protection (or What If My Broker Goes Bust?)

135

(1)

Placing a Trade with Your Broker

136

(1)

Asset Management Accounts

137

(2)

Common Stock

139

(18)

Own Your Own Business: Investing in Common Stocks

140

(1)

But How Am I Going to Make Money?

141

(3)

Dividend Payout Ratio

143

(1)

Dividend Yield

143

(1)

We're Not Talking About Leaky Faucets: Investing Through DRIPs

144

(1)

The Truth About Stock Splits

145

(1)

Spotting an Excellent Business

145

(6)

Durable Competitive Advantages

145

(1)

Raise Those Prices!

146

(1)

Complimentary Cultural and Demographic Drivers

146

(1)

Product Relevance

146

(1)

History of Share Repurchases

147

(1)

Sensible Management with Reasonable Compensation

148

(1)

You Want Them Holding the Bag

148

(1)

Open and Honest Communication

148

(1)

History of Increasing Dividends

149

(1)

Dividends, Interest, and Fixed Charges ``Earned''

149

(1)

Little or No Debt

150

(1)

Tons of Free Cash Flow

150

(1)

A Controlling Shareholder (Well, Sometimes ...)

150

(1)

Market Leadership

151

(1)

Price

151

(1)

Researching Individual Stocks

151

(2)

The Invaluable Value Line

152

(1)

S&P Stock Guides: Another Great Tool

153

(1)

The Best Newspapers for Stock Info

153

(1)

All the News That's Fit to Print: Annual Reports

153

(1)

If You Own It, You Better Love It (or the Evils of Market Timing)

154

(1)

A Word on IPO's, Penny Stocks, and Hot Tips

155

(2)

Slow and Steady Wins the Race: Fixed-Income Securities

157

(18)

The Importance of the Debt Markets

158

(1)

When Do You Get That Groovy Interest Income?

159

(2)

Beware the Call Feature

159

(1)

Sinkers

160

(1)

The Wonderful World of Bond (No, Not James)

161

(4)

When Do You Want Bonds in Your Portfolio?

161

(1)

How Inflation Erodes Bonds

162

(2)

Bond Ratings

164

(1)

How to Read a Bond Table

164

(1)

Corporate Debt---An Unwise Choice for Small Investors

165

(1)

Searching for Treasure

166

(2)

How to Buy Treasuries

167

(1)

Buying Outstanding Treasuries

167

(1)

An Old Favorite: Savings Bonds

168

(3)

Patriot Bonds (Formerly EE Savings Bonds)

168

(2)

HH Bonds

170

(1)

I Bonds

170

(1)

Agency-O-Rama

171

(1)

CDs: A Viable Alternative to Government Debt

172

(1)

Municipal Bonds

172

(2)

Calculating Taxable-Equivalent Yield

173

(1)

Money Market Funds

174

(1)

Preferred Stock: The Hybrid of Wall Street

175

(8)

What Do You Get When You Mix Stocks with Bonds?

176

(1)

It Just Doesn't Make Sense

176

(1)

Bolstering Capital

177

(1)

It's a Family Affair

178

(1)

What to Look for in a Preferred Stock

178

(3)

Cumulative vs. Noncumulative

179

(1)

Voting Rights

179

(1)

Redemption Rights

180

(1)

Participating Provisions

180

(1)

Adjustable Rate Provisions

181

(1)

Riding with the Top Down: Convertible Preferred Stock

181

(2)

Navigating the Mutual Fund Universe

183

(14)

What Exactly Are Mutual Funds?

184

(1)

Open-End and Closed-End Funds

184

(2)

Avoid Load Funds

186

(1)

Back-End Loads and 12b-1 Fees

187

(1)

Index and Tax-Advantaged Funds

187

(1)

Exchange-Traded Funds

188

(2)

SPDRs

188

(1)

iShares

189

(1)

HOLDRs: An Alternative to ETFs

190

(1)

What's Out There in the Fund Universe?

191

(1)

Why Funds Are a Great Investment Option

191

(2)

How to Pick a Winning Fund

193

(1)

The Problem with Bond Funds

194

(1)

Lifestyle and Tax-Efficient Funds

194

(3)

Real Estate Investment Trusts (REITs)

197

(12)

The REIT Stuff

197

(1)

Advantages of Investing Through REITS

198

(2)

Types of REITs

200

(1)

Not All REITs Are Alike

201

(2)

Residential

201

(1)

Retail

202

(1)

Office and Industrial

202

(1)

Self-Storage

203

(1)

Hotel and Resort

203

(1)

Health Care

203

(1)

Funds from Operations

203

(1)

I'll Pass on the Accounting

204

(2)

Some Additional Resources

206

(1)

Other Types of Real Estate Ownership

206

(3)

Part 4: Basic Financial Statement Analysis

209

(44)

The Income Statement

211

(12)

Sample Income Statement

211

(1)

Revenue

212

(1)

Cost of Goods Sold

213

(1)

Gross Profit and Gross Profit Margin

213

(1)

SG&A Expenses

214

(1)

Research and Development (R&D)

214

(1)

Operating Profit and Operating Profit Margin

214

(1)

Income from Continuing Operations

215

(1)

Income from Discontinued Operations

215

(1)

Nonrecurring vs. Extraordinary Gains and Losses

215

(1)

Minority Interest

216

(2)

Operating Income Before Taxes

218

(1)

Net Income

218

(1)

Earnings per Share

218

(2)

Basic EPS

219

(1)

Diluted EPS

219

(1)

The Price to Earnings Ratio (P/E Ratio)

220

(1)

Earnings Yield

220

(1)

Average Earnings

220

(1)

Other Comprehensive Income

221

(2)

The Balance Sheet

223

(12)

Sample Balance Sheet

223

(2)

Current Assets

225

(4)

Cash and Cash Equivalents

225

(1)

Short-Term Investments

226

(1)

Accounts Receivable

226

(1)

Accounts Receivable Turnover

226

(1)

Average Days Outstanding

227

(1)

Inventory

227

(1)

Inventory Turnover

228

(1)

Inventory Processing Period

228

(1)

Prepaid Expenses

228

(1)

Current Liabilities

229

(1)

Accounts Payable

229

(1)

Current Portion of Long-Term Debt

229

(1)

Measuring Liquidity

229

(1)

Current Ratio

229

(1)

Quick Test Ratio

230

(1)

Property, Plant, and Equipment

230

(1)

Long-Term Debt

231

(1)

Debt to Equity Ratio

231

(1)

Shareholders' Equity

232

(3)

Return on Equity (ROE)

232

(1)

Maximum Sustainable Growth Rate

232

(1)

Return on Assets

233

(2)

The Cash Flow Statement

235

(8)

Sample Cash Flow Statement

235

(2)

The Sections of the Cash Flow Statement

237

(3)

Cash Flows from Operations (CFO)

237

(1)

Cash Flows from Investing Activities (CFI)

238

(1)

Cash Flows from Financing Activities (CFF)

239

(1)

Increase or Decrease in Cash and Cash Equivalents

240

(1)

Free Cash Flow (FCF)

240

(1)

A Word on EBITDA

240

(3)

The Footnotes

243

(10)

Description of Operations

244

(1)

Legal Proceedings

244

(2)

Operating Leases

246

(1)

Reliance upon Key Customers

247

(1)

Related-Party Transactions

248

(2)

Pension Obligations

248

(2)

Stock Option Expense

250

(3)

Part 5: Fundamental Investing Strategies

253

(44)

Always Let Price Be Your Guide

255

(12)

Price Determines Results

255

(1)

Valuing a Business

256

(2)

Spotting Speculative Bubbles

258

(1)

Ben Graham's Margin of Safety

259

(1)

Using Dollar Cost Averaging to Lower Your Cost Basis

260

(2)

Reducing Trading Costs

262

(1)

How to Think About a Falling Stock Market

263

(4)

Asset Allocation

267

(10)

Remember Your Objectives? There's an Asset Mix to Achieve Them!

268

(4)

Scenario 1

269

(1)

The Result

269

(1)

Scenario 2

269

(2)

Scenario 3

271

(1)

Concentrating Your Assets

272

(1)

The Result

273

(1)

A Word on Rebalancing

273

(1)

Just-in-Case Cash

274

(3)

Mattresses Are for Sleeping, Not Stashing

275

(2)

Evaluating Investment Performance

277

(10)

Total Return

278

(1)

Calculating Simple Return

278

(1)

Calculating Compound Annual Growth Rate

279

(2)

Absolute vs. Relative Performance

281

(1)

Choosing a Benchmark for Comparison

281

(2)

S&P 500

282

(1)

Dow Jones Indices

282

(1)

Wilshire 5,000

282

(1)

Russell 2,000

282

(1)

NASDAQ Composite

282

(1)

NYSE Composite

283

(1)

Morgan Stanley International Europe, Australia, and Far East Index (MSCI EAFE Index)

283

(1)

Grading Your Investment Advisor

283

(4)

Honors Your Risk Profile

283

(1)

Ample Returns on a Multi-Year Basis

283

(1)

Fee-Based

284

(3)

Keeping Uncle Sam's Greedy Mitts Off of Your Assets

287

(10)

Capital Gains Tax

287

(2)

The Wash Sale Rule

288

(1)

Dividend Taxes

289

(1)

Big Changes in Estate Taxes!

289

(1)

The Estate Tax Repeal ... Not So Appealing?

290

(2)

They Can Tax That?!

290

(1)

Watch That Generation Gap

291

(1)

Tax-Saving Alternatives

292

(1)

Gimme Shelter

292

(1)

QTIP: No, Not the Kind You Stick in Your Ear

292

(1)

Charitable Trusts

292

(1)

Other Ways to Reduce Estate Taxes

293

(4)

Life (Saver!) Insurance

293

(1)

The Gift That Keeps on Giving

293

(1)

Just a Little Token---Gifts to Minors' Trusts

294

(1)

Personal Residence Trust

294

(3)

Part 6: Advanced Investing Strategies

297

(52)

Hedging Your Options

299

(14)

Weighing Your Options

299

(1)

Puts and Calls

300

(1)

Hedge Your Bet with a Call

301

(1)

Prevent Portfolio Wipeout with a Put

301

(1)

How Did This Get Started?

301

(1)

Risk-Loving Speculator Seeks Cautious Hedgehog

302

(1)

In the Money

303

(1)

Reading an Option Table

304

(2)

Options Galore

306

(1)

Most Active Contracts

306

(1)

Selling Short vs. Trading Options

306

(1)

Risky Business

307

(1)

Option Strategies That Protect Your Stock Positions

308

(1)

Using Puts for Downside Protection

308

(1)

Stock Index Options

309

(1)

S&P Index Options

309

(1)

Hedge Strategies for Index Options

310

(1)

The Braveheart of Wall Street

310

(1)

LEAPS

311

(2)

Fancy Futures

313

(10)

What Is a Commodity?

314

(1)

It All Began with Farmers

314

(1)

How a Future Differs from an Option

315

(1)

How Margins Work

316

(1)

Using Futures to Offset Uncertainty

317

(1)

Financial Futures

318

(1)

Options on Futures---Oy!

319

(1)

Spread Strategies for Speculators

320

(1)

Program Trading

320

(1)

Gold Nuggets

321

(2)

Precious Metal Companies and Funds

322

(1)

Alternative Investments

323

(26)

How Regular Folk Discovered Alternative Investments

323

(1)

Hedge Funds

324

(1)

Venture Capital and LBO Funds

325

(1)

The Private Equity Fund of Funds

326

(2)

What You Need to Qualify for a Fund of Funds

326

(1)

How Limited Partnership Works

327

(1)

Pros and Cons of LP Investments

328

(3)

Appendixes

A. Useful Investing Information

331

(6)

B. Glossary

337

(8)

C. How to Avoid Turning the Stock Market into Your Own Personal Emotional Roller Coaster

345

(4)

Index

349

Amazon no longer offers textbook rentals. We do!

The Complete Idiot's Guide to Investing, 3E

The Complete Idiot's Guide to Investing, 3E

9781592574803

1592574807

Summary

Author Biography

Table of Contents

Supplemental Materials

Write a Review

Amazon no longer offers textbook rentals. We do!

The Complete Idiot's Guide to Investing, 3E

The Complete Idiot's Guide to Investing, 3E

9781592574803

1592574807

Summary

Author Biography

Table of Contents

Supplemental Materials

Write a Review

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