Investing All-in-One For Dummies

Description

Make the most of your investment portfolio with a mix of assets from stocks to real estate to cryptocurrency There’s nothing more satisfying than seeing the balance of a financial account grow month over month. But before that can happen, you need to know the best places to invest your money. Who can you trust for solid, reliable investing advice? Investing All-in-One For Dummies offers sound guidance for investors at every level. Whether you’re stumped by stocks, baffled by bonds, mystified about mutual funds, or curious about cryptocurrency, this book gives you a solid foundation in those investing concepts and many others. After reading the expert advice and considering your risk tolerance and timeline, you can confidently choose the best investments for your financial goals. Containing advice from 10 different Dummies investing guides, Investing All-in-One For Dummies shows you how to: Set short- and long-term investing goals, invest to minimize your tax hit, and develop an investing strategy using a mix of investment vehicles Decide when to buy, hold, or sell an investment Choose the right mix of stocks, bonds, and mutual funds to create a diversified portfolio Identify real estate investment opportunities and find the capital to make purchases Execute trades through an online broker instead of using a traditional investment firm Evaluate modern investing trends like cryptocurrency and environmental, social, and governance (ESG) investing For anyone who wants to dip their toes into the markets or who tends to leave their investment decisions in the hands of someone else, Investing All-in-One For Dummies is the must-read resource when you’re ready to make informed decisions and pick solid investments for your financial future. 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 Book 1: Getting Started with Investing Chapter 1: Exploring Your Investment Choices Getting Started with Investing Building Wealth with Ownership Investments Entering the stock market Owning real estate Generating Income from Lending Investments Considering Cash Equivalents Choosing Where to Invest and Get Advice Finding the best fund companies and brokers Finding an acceptable advisor Chapter 2: Weighing Risks and Returns Evaluating Risks Market-value risk Individual-investment risk Purchasing-power risk (also known as inflation risk) Career risk Analyzing Returns The components of total return Savings and money market account returns Bond returns Stock returns Real estate returns Compounding Your Returns The value of getting a few extra percent Considering your goals Chapter 3: 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 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 Book 2: Investing in Your 20s and 30s Chapter 1: Using Investments to Accomplish Your Goals Setting and Prioritizing Your Shorter-Term Goals Accumulating a rainy-day fund Saving for large purchases Investing for a small business or home Saving for kids’ higher educational costs Investing short-term money Investing in Retirement Accounts Understanding retirement account perks Grappling with retirement account concerns Taking advantage of retirement accounts Surveying retirement account choices Selecting retirement account investments Chapter 2: Minimizing Your Taxes When Investing Understanding Investment Taxes Tracking taxation of investment distributions Determining your tax bracket Devising tax-reduction strategies Reducing Your Taxes When Selling Investments Weighing nontax issues Tuning in to tax considerations Chapter 3: Laying Out Your Financial Plans First Priorities: Paying Off High-Cost Debt and Building a Safety Reserve Paying off high-cost consumer debt Establishing an emergency reserve What about Paying Down Other Debts? Assessing student loans Considering paying down mortgage debt Sorting Out Your Financial Plans Considering your investment options and desires Assessing your savings rate Investing regularly with dollar cost averaging Knowing the Impact of Investing for College Costs Paying for college Considering educational savings account options Investing money earmarked for college Securing Proper Insurance Chapter 4: Starting Out with Bank and Credit Union Accounts Understanding FDIC Bank Insurance Investing in Banking Account and Savings Vehicles Bank checking accounts and debit cards Savings accounts and certificates of deposit Negotiating with Bankers Feeling Secure with Your Bank Evaluating any bank Protecting yourself when banking online Exploring Alternatives to Bank Accounts Credit union accounts and benefits Brokerage cash management accounts Money market mutual funds Book 3: Checking Out Stock Investing Chapter 1: Gathering Information on Stocks 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 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 2: Investing for Long-Term Growth Becoming a Value-Oriented Growth Investor Choosing Growth Stocks with a Few Handy Tips Looking for leaders in megatrends Comparing a company’s growth to an industry’s growth Considering a company with a strong niche Checking out a company’s fundamentals Evaluating a company’s management 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 3: 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 Analyzing Income Stocks Pinpointing your needs first Checking out yield 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) Chapter 4: Using Basic Accounting to Choose Winning Stocks Recognizing Value When You See It Understanding different types of value Putting the pieces together Accounting for Value Breaking down the balance sheet Looking at the income statement Tooling around with ratios Book 4: Looking at Bond Investing Chapter 1: Bond Fundamentals Understanding What Makes a Bond a Bond Choosing your time frame Picking who you trust to hold your money Differentiating among bonds, stocks, and collectibles Why Hold Bonds? Identifying the best reason to buy bonds: Diversification Going for the cash Introducing the Major Players in the Bond Market Buying Solo or Buying in Bulk Picking and choosing individual bonds Going with a bond fund or funds The Triumphs and Failures of Fixed-Income Investing Beating inflation, but not by very much Saving the day when the day needed saving Gleaning some important lessons Realizing How Crucial Bonds Are Today Viewing Recent Developments, Largely for the Better Chapter 2: All about the Interest The Tricky Business That Is Calculating Rates of Return Cutting deals Changing hands Embracing the complications Measuring the Desirability of a Bond Level one: Getting the basic information Level two: Finding out intimate details Level three: Examining the neighborhood Understanding Yield Coupon yield Current yield Yield-to-maturity Yield-to-call Worst-case basis yield The 30-day SEC yield Recognizing Total Return (This Is What Matters Most!) Figuring in capital gains and losses Factoring in reinvestment rates of return Allowing for inflation adjustments Pretax versus post-tax Measuring the Volatility of Your Bond Holdings Time frame matters most Quality counts The coupon rate matters, too Returning to the Bonds of Babylonia Chapter 3: Checking Out Types of Bonds Exploring the Many Ways of Investing with Uncle Sam Savings bonds Treasury bills, notes, and bonds Treasury Inflation-Protected Securities (TIPS) Industrial Returns: Corporate Bonds Comparing corporate bonds to Treasuries The crucial credit ratings Special considerations for investing in corporate debt The volatility of high-yield bonds Lots of Protection, a Touch of Confusion: Agency Bonds Identifying the bond issuers Sizing up the government’s actual commitment Eyeing default risks, yields, markups, and more Weighing taxation matters Banking Your Money on Other People’s Mortgages Bathing in the mortgage pool Deciding whether to invest in the housing market (Almost) Tax-Free Havens: Municipal Bonds Sizing up the muni market Comparing and contrasting with other bonds Delighting in the diversification of municipals Choosing from a vast array of possibilities Chapter 4: Investing (Carefully!) in Individual Bonds Navigating Today’s Individual Bond Market Getting some welcome transparency Ushering in a new beginning Dealing with Brokers and Other Financial Professionals Identifying the role of the middleman Do you need a broker or agent at all? Selecting the right broker or agent Checking the dealer’s numbers Hiring a financial planner Doing It Yourself Online If you’re looking to buy If you’re looking to sell Perfecting the Art of Laddering Protecting you from interest rate flux Tinkering with your time frame Chapter 5: Picking a Bond Fund That Will Serve You for Life Defining the Basic Kinds of Funds Mining mutual funds Considering an alternative: Closed-end funds Establishing a position in exchange-traded funds Understanding unit investment trusts Taking a flyer (or not) on an exchange-traded note What Matters Most in Choosing a Bond Fund of Any Sort Selecting your fund based on its components and their characteristics Pruning out the underperformers Laying down the law on loads Sniffing out false promises Book 5: Moving on to Mutual Funds and Exchange-Traded Funds Chapter 1: Considering Mutual Funds’ Pros and Cons Introducing Mutual Funds and Exchange-Traded Funds Getting a Grip on Funds Financial intermediaries Open-end versus closed-end funds Opting for Mutual Funds Fund managers offer expertise Funds save you money and time Fund diversification minimizes your risk Funds undergo regulatory scrutiny You choose your risk level Fund risk of bankruptcy is nil Funds save you from sales sharks You have convenient access to your money Addressing the Drawbacks Don’t worry about these . . . Worry about these (but not too much) . . . Chapter 2: Finding the Best Mutual Funds Evaluating Gain-Eating Costs Losing the load: Say no to commissions Considering a fund’s operating expenses Weighing Performance and Risk Star today, also-ran tomorrow Apples to apples: Comparing performance numbers Recognizing Manager Expertise Chapter 3: Buying Mutual Funds from the Best Firms Finding the Best Buys The Vanguard Group Fidelity Investments Dodge & Cox Oakmark T. Rowe Price TIAA USAA Other fund companies Discount Brokers: Mutual Fund Supermarkets Buying direct versus discount brokers Debunking “No Transaction Fee” funds Using the best discount brokers Places to Pass By Chapter 4: What the Heck Is an ETF, Anyway? The Nature of the Beast Choosing between the Classic and the New Indexes Preferring ETFs over Individual Stocks Distinguishing ETFs from Mutual Funds Why the Big Boys Prefer ETFs Trading in large lots Savoring the versatility Why Individual Investors Are Learning to Love ETFs The cost advantage: How low can you go? Uncle Sam’s loss, your gain What you see is what you get Getting the Professional Edge Passive versus Active Investing: Your Choice The index advantage The allure of active management Why the race is getting harder to measure . . . and what to do about it Do ETFs Belong in Your Life? Calculating commissions Moving money in a flash Understanding tracking error Making a sometimes tricky choice Chapter 5: Risk Control, Diversification, and Other Things to Know about ETFs Risk Is Not Just a Board Game The trade-off of all trade-offs (safety versus return) So just how risky are ETFs? Smart Risk, Foolish Risk How Risk Is Measured Standard deviation: The king of all risk measurement tools Beta: Assessing price swings in relation to the market Mixing and Matching Your Stock ETFs Filling in your style box Buying by industry sector Don’t slice and dice your portfolio to death Book 6: Investing Online Chapter 1: Getting Ready for Online Investing Why Investing Online Is Worth Your While Getting Started Gut-Check Time: How Much Risk Can You Take? Passive or Active? Deciding What Kind of Investor You Plan to Be How to know if you’re a passive investor Sites for passive investors to start with How to know whether you’re an active investor Sites for the active investor to start with Chapter 2: Getting Your Device Ready for Online Investing Turning Your Device into a Trading Station Using favorites to put data at your fingertips Putting key mobile apps a touch away Compiling a list of must-watch sites Tracking the Market’s Every Move Getting price quotes on markets and stocks Slicing and dicing the markets Your crystal ball: Predicting how the day will begin Getting company descriptions Keeping tabs on commodities Tracking bonds and U.S. Treasuries Monitoring Market-Moving News Financial websites Traditional financial news sites Checking In on Wall Street Chatter Everyone is an expert: Finding blogs Getting in tune with podcasts Taming Twitter Keeping Tabs on the Regulators Searching the Internet High and Low Keeping the Bad Guys Out: Securing Your PC Mastering the Basics with Online Tutorials and Simulations Online tutorials Simulations Chapter 3: Connecting with an Online Broker Finding the Best Broker for You The nine main factors to consider Gotchas to watch out for Separating the Types of Brokerages Paying the minimum with a deep discounter Getting more with a discounter Full-service traditional Avoiding Hidden Fees Finding Out What Reviewers Think Is Your Money Safe? Checking Out Your Broker Cutting the Cord: Mobile Trading Pay Attention to Where Your Cash Is Parked: Money Market Funds Buying Stocks and Mutual Funds without a Broker Stocks: Direct investments Mutual funds: Straight from the mutual fund company Opening and Setting Up Your Account The checklist of what you need to know The checklist of what you need to have Chapter 4: Entering and Executing Trades Understanding How Stock Trades and Shares Are Handled Ways you can hold your investments A second in the life of a trade Getting It Done: Executing Your Trades Surveying types of orders Checking out costs of different orders Tailoring your trades even more Book 7: Introducing Fundamental Analysis Chapter 1: Understanding Fundamental Analysis Why Bother with Fundamental Analysis? Some of the real values of fundamental analysis Driving home an example Putting fundamental analysis to work Knowing what fundamentals to look for Knowing what you need Knowing the Tools of the Fundamental Analysis Trade Staying focused on the bottom line Sizing up what a company has to its name Burn, baby, burn: Cash burn Financial ratios: Your friend in making sense of a company Making Fundamental Analysis Work For You Using fundamentals as signals to buy or sell The perils of ignoring the fundamentals Using fundamental analysis as your guide Chapter 2: Getting Up to Speed with Fundamental Analysis What Is Fundamental Analysis? Going beyond betting Understanding how fundamental analysis works Knowing who can perform fundamental analysis Following the money using fundamentals Comparing Fundamental Analysis with Other Ways of Picking Investments How fundamental analysis stacks up against index investing Comparing fundamental analysis with technical analysis Putting Fundamental Analysis to Work For You How difficult is fundamental analysis? Do you need to be a math wizard? Is fundamental analysis for you? The risks of fundamental analysis Making Money with Fundamental Analysis Putting a price tag on a stock or bond Being profitable by being a “contrarian” The Fundamental Analysis Toolbox Introducing the income statement Balance-sheet basics Getting the mojo of cash flows Familiarizing yourself with financial ratios (including the P-E) Chapter 3: Gaining an Edge with Fundamental Analysis Better Investing with Fundamentals Picking stocks for fundamental reasons Dooming your portfolio by paying too much Sitting through short-term volatility Relying on the Basic Info the Pros Use What is “the Warren Buffett Way”? Checking in on Graham and Dodd Figuring Out When to Buy or Sell a Stock Looking beyond the per-share price Seeing how a company’s fundamentals and its price may get out of alignment Avoiding overhyped “story stocks” Pairing buy-and-hold strategies with fundamental analysis Looking to the long term Knowing that patience isn’t always a virtue Chapter 4: Getting Your Hands on Fundamental Data Getting in Sync with the Fundamental Calendar Which companies must report their financials to the public? Kicking it all off: Earnings season Getting the earnings press release Bracing for the 10-Q Running through the 10-K Flipping through the annual report There’s no proxy like the proxy statement Getting Up to Speed with Basic Accounting and Math Operating activities: Finding smooth operators Investing activities: You have to spend money to make money Financing activities: Getting in tune with high finance Undestanding a key fundamental math skill: Percentage changes Knowing How to Get the Fundamental Data You Need Getting acquainted with the SEC’s database Accessing company fundamentals using EDGAR Finding stocks’ dividend histories Getting stock-split information Book 8: Investing in Real Estate Chapter 1: Evaluating Real Estate as an Investment Understanding Real Estate’s Income- and Wealth-Producing Potential Recognizing the Caveats of Real Estate Investing Comparing Real Estate to Other Investments Returns Risk Liquidity Capital requirements Diversification value Opportunities to add value Being aware of the tax advantages Determining Whether You Should Invest in Real Estate Do you have sufficient time? Can you deal with problems? Does real estate interest you? Can you handle market downturns? Fitting Real Estate into Your Plans Ensuring your best personal financial health Protecting yourself with insurance Considering retirement account funding Thinking about asset allocation Chapter 2: Covering Common Real Estate Investments Identifying the Various Ways to Invest in Residential Income Property Buying a place of your own Converting your home to a rental Investing and living in well-situated fixer-uppers Purchasing a vacation home Paying for timeshares and condo hotels Surveying the Types of Residential Properties You Can Buy Single-family homes Attached housing Apartments Considering Commercial Real Estate Buying Undeveloped or Raw Land Chapter 3: Identifying Sources of Capital Calculating the Costs of Admission Forgetting the myth of no money down Determining what you need to get started Rounding Up the Required Cash by Saving Overcoming Down Payment Limitations Changing your approach Tapping into other common cash sources Chapter 4: Location, Location, Value Deciding Where to Invest Finding Properties to Add Value Evaluating a Region: The Big Picture Population growth Job growth and income levels Investigating Your Local Market Supply and demand Focusing on the path of progress Considering barriers to entry Government’s effect on real estate Evaluating Neighborhoods Schools Crime rates Pride of ownership Role play: What attracts you to the property? Mastering Seller’s and Buyer’s Markets Understanding real estate cycles Timing the real estate market Book 9: Investing in Trends Chapter 1: Taking the Nickel Tour of Cannabis Investing Weighing the Pros and Cons of Investing in Cannabis Pros Cons Investing in Businesses That Touch the Plant or Those That Don’t Exploring Your Investment Options Starting your own business Investing in cannabis real estate Buying and selling stocks Diversifying with exchange-traded funds and mutual funds Considering private investment opportunities Finding Investment Opportunities Researching Investment Opportunities Planning Your Investment Strategy Investing in a Cannabis Business Chapter 2: The Political, Cultural, and Regulatory Landscape of Cannabis Investing Recognizing the Impact of Laws on the Industry Getting up to speed on U.S. federal law and enforcement Brushing up on state cannabis laws Considering local laws, too Examining cannabis laws in other countries Riding the Waves of Politics and Culture Checking the nation’s pulse Debunking misconceptions of cannabis and users Examining activism Tuning into cannabis culture Accounting for the High Costs of Doing Business Regulatory and compliance costs Federal, state, and local taxes Security costs Chapter 3: What Is a Cryptocurrency? Beginning with the Basics of Cryptocurrencies The definition of money Some cryptocurrency history Key crypto benefits Common crypto and blockchain myths Risks Gearing Up to Make Transactions Wallets Exchanges Communities Making a Plan Before You Jump In Select your cryptos Analyze, invest, and profit Chapter 4: How Cryptocurrencies Work Explaining Basic Terms in the Cryptocurrency Process Cryptography Nodes Mining Proof-of-work Proof-of-stake Proof-of-importance Transactions: Putting it all together Cruising through Other Important Crypto Concepts Adaptive scaling Decentralization Harvesting Open source Public ledger Smart contracts Stick a Fork in It: Digging into Cryptocurrency Forks What is a fork, and why do forks happen? Hard forks and soft forks Free money on forks Chapter 5: Entering the World of ESG Investing Surveying the Current ESG Landscape Exploring What ESG Is (and Isn’t) Defining the breadth of ESG Comparing SRI, ethical, and impact investing to ESG Determining whether ESG delivers good investment performance Understanding ESG’s Impact on the Environment, Society, and Governance Meeting environmental and global warming targets Providing solutions to social challenges Meeting corporate governance requirements Using International Standards to Determine ESG Objectives Leading the charge: European legislation on ESG Ahead of its time: The United Nations Staying focused: The Sustainability Accounting Standards Board Building a framework: The Global Reporting Initiative Index EULA