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Eric Tyson. Investing For Dummies
20 Rules for Successful Investing
Praise for Eric Tyson’s Best-Selling For Dummies Titles
Investing For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Investing For Dummies Cheat Sheet” in the Search box. Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Getting Started with Investing
Exploring Your Investment Choices
Getting Started with Investing
Building Wealth with Ownership Investments
Entering the stock market
Owning real estate
Running a small business
WHO WANTS TO INVEST LIKE A MILLIONAIRE?
Generating Income from Lending Investments
THE DOUBLE WHAMMY OF INFLATION AND TAXES
Considering Cash Equivalents
Steering Clear of Futures and Options
Passing Up Precious Metals
Getting Clobbered in Currencies and Cryptocurrencies
Counting Out Collectibles
Weighing Risks and Returns
Evaluating Risks
Market-value risk
Diversify for a smoother ride
Consider your time horizon
Pare down holdings in bloated markets
Individual-investment risk
Purchasing-power risk (also known as inflation risk)
INFLATION RAGIN’ OUTTA CONTROL
Career risk
Analyzing Returns
The components of total return
After-tax returns
Psychological returns
Savings and money market account returns
Bond returns
Stock returns
Real estate returns
ARE SMALLER-COMPANY STOCK RETURNS HIGHER?
Small-business returns
Considering Your Goals
Getting Your Financial House in Order
Establishing an Emergency Reserve
SHOULD YOU INVEST EMERGENCY MONEY IN STOCKS?
Evaluating Your Debts
Conquering consumer debt
Mitigating your mortgage
Consider your investment opportunities
Don’t get hung up on mortgage tax deductions
Establishing Your Financial Goals
Tracking your savings rate
INVESTING AS A COUPLE
Determining your investment tastes
Funding Your Retirement Accounts
Gaining tax benefits
Starting your savings sooner
BROADENING STOCK OWNERSHIP WITH SOCIAL SECURITY CHOICE
Checking out retirement account options
Company-based plans
IRAs
CONSIDERING ROTH 401(K) AND 403(B) OPTIONS
Annuities
Choosing retirement account investments
Taming Your Taxes in Non-Retirement Accounts
Figuring out your tax bracket
Knowing what’s taxed and when to worry
Choosing the Right Investment Mix
Considering your age
Making the most of your investment options
Easing into risk: Dollar cost averaging
Treading Carefully When Investing for College
Education Savings Accounts
Section 529 plans
Allocating college investments
PAYING FOR COLLEGE
Protecting Your Assets
Stocks, Bonds, and Wall Street
The Workings of Stock and Bond Markets
How Companies Raise Money through the Financial Markets
Deciding whether to issue stocks or bonds
Taking a company public: Understanding IPOs
LOOKING AT SMALL-BUSINESS INITIAL PUBLIC OFFERINGS
Understanding Financial Markets and Economics
Driving stock prices through earnings
Weighing whether markets are efficient
Moving the market: Interest rates, inflation, and the Federal Reserve
Realizing that high interest rates are generally bad
Discovering the inflation and interest rate connection
Exploring the role of the Federal Reserve
UNDERSTANDING SUPER-LOW (AND NEGATIVE) INTEREST RATES
What the heck is “quantitative easing”?
Building Wealth with Stocks
Taking Stock of How You Make Money
Defining “The Market”
Looking at major stock market indexes
BULL AND BEAR MARKETS
Counting reasons to use indexes
Stock-Buying Methods
Buying stocks via mutual funds and exchange-traded funds
Using hedge funds
Selecting individual stocks yourself
Spotting the Right Times to Buy and Sell
Calculating price-earnings ratios
Citing times of speculative excess
The internet and technology bubble
The Japanese stock market juggernaut
The 1960s weren’t just about rock ’n’ roll
The 1920s consumer spending binge
Buying more when stocks are “on sale”
TULIP BULB MANIA
Avoiding Problematic Stock-Buying Practices
Beware of broker conflicts of interest
Don’t short-term trade or try to time the market
Be wary of gurus
RECOGNIZING AN INVESTMENT GAMBLING PROBLEM
Shun penny stocks
The Keys to Stock Market Success
Investigating and Purchasing Individual Stocks
Building on Others’ Research
Discovering the Value Line Investment Survey
1. Business
2. Analyst assessment
3. Value Line’s ratings
4. Stock price performance
5. Historic financials
6. P/E ratio
7. Capital structure
8. Current position
9. Annual rates
10. Quarterly financials
Considering independent brokerage research
GETTING YOUR HANDS ON VALUE LINE’S REPORTS
Examining successful money managers’ stock picks
Reviewing financial publications and websites
Understanding Annual Reports
Financial and business highlights
Balance sheet
Assets
Liabilities
Stockholders’ equity
Income statement
Revenue
Expenses
Net income calculations
Earnings per share
Exploring Other Useful Corporate Reports
10-Ks
10-Qs
Proxies
FUNDAMENTAL VERSUS TECHNICAL ANALYSIS
Getting Ready to Invest in Stocks
Understanding stock prices
Purchasing stock “direct” from companies
Placing your trade through a broker
Exploring Bonds and Other Lending Investments
Banks: Considering the Cost of Feeling Secure
Facing the realities of bank insurance
Online banking: More for you?
Evaluating FDIC coverage
Other online bank issues to investigate
Being wary of the certificate of deposit (CD)
Swapping your savings account for a money market fund
Money market fund advantages
Money market fund disadvantages (if you’d really call them that)
Why Bother with Bonds?
Assessing the Different Types of Bonds
Determining when you get your money back: Maturity matters
Weighing the likelihood of default
Examining the issuers (and tax implications)
Treasury bonds
Municipal bonds
Corporate bonds
Mortgage bonds
Convertible bonds
INTERNATIONAL BONDS
Inflation-protected Treasury bonds
ZERO COUPON BONDS
Buying Bonds
Deciding between individual bonds and bond funds
Understanding bond prices
Purchasing Treasuries
ASSESSING INDIVIDUAL BONDS THAT YOU ALREADY OWN
Shopping for other individual bonds
Considering Other Lending Investments
Guaranteed-investment contracts
Private mortgages
OUT OF SIGHT: PRICE FLUCTUATIONS OF PRIVATE MORTGAGES, GICs, AND CDs
Mastering Mutual Funds and Exchange-Traded Funds
Distinguishing between Mutual Funds and Exchange-Traded Funds
Discovering the Benefits of the Best Funds
Professional management
Cost efficiency
Diversification
Reasonable investment minimums
Different funds for different folks
High financial safety
Accessibility
Reviewing the Keys to Successful Fund Investing
Minimize costs
Avoid load funds
WATCHING FOR HIDDEN LOADS
Beware of high operating expenses
Reflect on performance and risk
Stick with experience
Consider index funds
Steer clear of leveraged and inverse exchange-traded funds
Creating Your Fund Portfolio with Asset Allocation
Allocating for the long term
Diversifying your stock fund investments
The Best Stock Funds
Making money with stock funds
Exploring different types of stock funds
U.S. stock funds
EQUAL-WEIGHT STOCK INDEX FUNDS WORTH CONSIDERING
International stock funds
Sector funds
The Best Bond Funds
Avoiding yield-related missteps
Treading carefully with actively managed bond funds
Stabilizing your portfolio by investing in short-term bond funds
Taxable short-term bond funds
U.S. Treasury short-term bond funds
Federally tax-free short-term bond funds
Earning higher returns with intermediate-term bond funds
Taxable intermediate-term bond funds
U.S. Treasury intermediate-term bond funds
Federally tax-free intermediate-term bond funds
Using long-term bond funds to invest aggressively
Taxable long-term bond funds
U.S. Treasury long-term bond funds
Federally tax-free long-term bond funds
State and federally tax-free long-term bond funds
Balanced and Asset Allocation Funds: The Best Hybrid Funds
The Best Money Market Funds
Taxable money market funds
U.S. Treasury money market funds
Municipal money market funds
HOW TO CONTACT FUND PROVIDERS
Choosing a Brokerage Firm
Getting Your Money’s Worth: Discount Brokers
Assessing the high-commission salespeople’s arguments
Selecting a discount broker
CAN FINANCIAL ADVISORS ACCESS BETTER FUNDS THAT AREN’T AVAILABLE TO YOU?
Considering Online Brokerage Services
Examining your online trading motives
Taking other costs into account
Looking at service quality
Listing the best online brokers
WHY YOU SHOULD KEEP YOUR SECURITIES IN A BROKERAGE ACCOUNT
Growing Wealth with Real Estate
Investing in a Home
Considering How Home Ownership Can Help You Achieve Your Financial Goals
The Buying Decision
Weighing the pros and cons of ownership
KNOWING WHEN TO BUY
Recouping transaction costs
Deciding How Much to Spend
HOME OWNERSHIP TAX SAVINGS
Looking through lenders’ eyes
Determining your down payment
Selecting Your Property Type
Finding the Right Property and Location
Keeping an open mind
Research, research, research
Understanding market value
Pounding the pavement
Investing in Real Estate
Discussing Real Estate Investment Attractions
Limited land
Leverage
Appreciation and income
ROLL OVER THOSE RENTAL PROPERTY PROFITS
Ability to add value
Ego gratification
Longer-term focus
REAL ESTATE INVESTING ISN’T AS WONDERFUL AS THEY SAY
Figuring Out Who Should Avoid Real Estate Investing
Examining Simple, Profitable Real Estate Investments
Finding a place to call home
THINK CAREFULLY BEFORE CONVERTING YOUR HOME INTO A RENTAL
Trying out real estate investment trusts
Evaluating Direct Property Investments
Residential housing
Land
Commercial real estate
Deciding Where and What to Buy
Considering economic issues
Taking a look at the real estate market
REFUTING THE WISDOM OF BUYING IN THE “BEST” AREAS
Examining property valuation and financial projections
Estimating cash flow
Valuing property
Discovering the information you need
Digging for a Good Deal
Recognizing Inferior Real Estate “Investments”
Avoiding ticking timeshares
KEEPING A SECOND HOME
Staying away from limited partnerships
Ignoring hucksters and scams
Skip high-priced real estate seminars
Don’t believe the hucksters
Stand strong against the scams
Real Estate Financing and Deal Making
Financing Your Real Estate Investments
Getting your loan approved
Solving down payment problems
Improving your credit score
Dealing with low appraisals
Handling insufficient income
Comparing fixed-rate with adjustable-rate mortgages
Locking into fixed-rate mortgages
Understanding adjustable-rate mortgages (ARMs)
BEWARE OF BALLOON LOANS
Choosing between fixed and adjustable mortgages
How comfortable are you with taking risk?
How many years do you expect to stay put?
Landing a great fixed-rate mortgage
Finding a suitable adjustable-rate mortgage
Getting off to a good start rate
Determining your future interest rate
Looking at common indexes for adjustable-rate mortgages
Analyzing adjustments
Avoiding negative amortization ARMs
Examining other mortgage fees
Finding the best lenders
Shopping through a mortgage broker
Shopping by yourself
Refinancing for a better deal
WHEN TO CONSIDER A HOME EQUITY LOAN
Working with Real Estate Agents
Recognizing agent conflicts of interest
Selecting a good agent
BUYING WITHOUT A REAL ESTATE AGENT
Closing the Deal
Negotiating 101
Inspecting the property
Shopping for title insurance and escrow services
Selling Real Estate
Negotiating real estate agents’ contracts
Forgoing a real estate agent
Savoring Small Business
Assessing Your Appetite for Small Business
Testing Your Entrepreneurial IQ
Considering Alternative Routes to Owning a Small Business
Being an entrepreneur inside a company
Investing in your career
Exploring Small-Business Investment Options
Starting your own business
Buying an existing business
Investing in someone else’s business
Choosing to invest for the right reasons
Avoiding investing mistakes
Drawing Up Your Business Plan
Identifying your business concept
WET BLANKETS THROUGHOUT HISTORY
Outlining your objectives
Analyzing the marketplace
Meeting customer needs
Besting the competition
Complying with regulations
Delivering your service or product
Marketing your service or product
Organizing and staffing your business
Projecting finances
Start-up and development costs
Income statement
Balance sheet
Writing an executive summary
Starting and Running a Small Business
Starting Up: Your Preflight Checklist
Preparing to leave your job
Valuing and replacing your benefits
Health insurance
Long-term disability insurance
Life insurance
Retirement plans
Other benefits
Financing Your Business
Going it alone by bootstrapping
Taking loans from banks and other outside sources
Borrowing from family and friends
Courting investors and selling equity
THE SHARK TANK PHENOMENON
Deciding Whether to Incorporate
Looking for liability protection
Taking advantage of tax-deductible insurance and other benefits
Cashing in on corporate taxes
S CORPORATIONS AND LIMITED LIABILITY COMPANIES: THE BEST OF BOTH WORLDS?
Making the decision to incorporate
Finding and Keeping Customers
Obtaining a following
Providing solid customer service
Setting Up Shop
Finding business space and negotiating a lease
SHOULD YOU WORK FROM HOME?
Equipping your business space
Accounting for the Money
Maintaining tax records and payments
Paying lower taxes (legally)
Keeping a Life and Perspective
Purchasing a Small Business
Examining the Advantages of Buying
Understanding the Drawbacks of Buying
Prerequisites to Buying a Business
Business experience
Financial resources
Focusing Your Search for a Business to Buy
Perusing publications
Networking with advisors
Knocking on some doors
Working with business brokers
Considering a Franchise or Multilevel Marketing Company
Finding a franchise
Franchise advantages
Franchise pitfalls
Evaluating a franchise
Considering a multilevel marketing company
WORK-FROM-HOME “OPPORTUNITIES”
QUALITY MULTILEVEL MARKETING COMPANIES ARE THE EXCEPTION
Evaluating a Small Business
Doing due diligence
QUESTIONING PROFITS
Determining a business’s value
Investing Resources
Selecting Investing Resources Wisely
Dealing with Information Overload
Separating Financial Fact from Fiction
Understanding how advertising corrupts the quality of investment advice
Influencing content
Corrupting content
Recognizing quality resources
Following the money
Figuring out their philosophy and agenda
Considering whether the information is constructive
Investigating their qualifications
Examining gurus’ claims
From Print to Podcast to Programs: Making Your Way through Various Financial Mediums
In Print: Magazines and Newspapers
Judging the journalists
Highlighting hype and horror
Quoting “experts” who don’t know their stuff
Focusing on noise and minutiae
Making the most of periodicals
Broadcasting Hype: Radio, Podcasts, and Television Programs
You often get what you pay for
Information and hype overload
Poor method of guest selection
Fillers and Fluff: Being Wary of Investment Newsletters
Selecting the Best Investment Books
Being Wary of Infomercial Books
Understanding how authors may take advantage of you
Learning by example
Ignoring Unaudited Performance Claims
Investing Books Worth Reading
A Random Walk Down Wall Street
Stocks for the Long Run
Built to Last and Good to Great
Mutual Funds For Dummies
Investigating Internet and Software Resources
Evaluating Investment Software
Taking a look at investment tracking software
Reviewing the benefits
Surveying the drawbacks
Checking out some alternatives
Considering investment research software
The best online tools for researching individual securities
UNDERSTANDING HOW INVESTMENT SOFTWARE CALCULATES RETURNS
The best software for researching funds
Investigating Internet Resources
Assessing online resources
Being aware of agendas
Soliciting grassroots customer feedback
Verifying online advice and information by fact checking
Picking the best investment websites
CorporateInformation.com
Morningstar.com
LOOK WHO’S TALKING
St. Louis Federal Reserve
SEC.gov
Vanguard.com
ONLINE INVESTING “GENIUSES”
The Part of Tens
Ten Investing Obstacles to Conquer
Trusting Authority
Getting Swept Up by Euphoria
Being Overconfident
Giving Up When Things Look Bleak
Refusing to Accept a Loss
Overmonitoring Your Investments
Being Unclear about Your Goals
Ignoring Important Financial Problems
Overemphasizing Certain Risks
Believing in Gurus
Ten Things to Weigh When Considering an Investment Sale
Remembering Preferences and Goals
Maintaining Balance in Your Portfolio
Deciding Which Ones Are Keepers
Tuning In to the Tax Consequences
Figuring Out What Shares Cost
Selling Investments with Hefty Profits
Cutting Your (Securities) Losses
Dealing with Unknown Costs
Recognizing Broker Differences
Finding a Trustworthy Financial Advisor
Ten Tips for Investing in a Down Stock Market
Don’t Panic
Keep Your Portfolio’s Perspective in Mind
View Major Declines as Sales
Identify Your Portfolio’s Problems
Avoid Growth Stocks If You Get Queasy Easily
Tune Out Negative, Hyped Media
Ignore Large Point Declines but Consider the Percentages
Don’t Believe You Need a Rich Dad to Be a Successful Investor
Understand the Financial Markets
Talk to People Who Care about You
Index. Numerics
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
Y
Z
About the Author
Dedication
Author’s Acknowledgments
WILEY END USER LICENSE AGREEMENT
