Investing in Shares For Dummies, UK Edition E-Book

David Stevenson

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch
• Veröffentlichungsjahr: 2012

Seitenzahl: 578

Beschreibung

Master the markets and make wise investments. Investing in Shares For Dummies gives you the sound advice and proven tactics you need to play the markets and watch your profits grow. The experienced authors introduce you to all categories of shares, show you how to analyse the key markets, and offer invaluable resources for developing a portfolio. Whether the markets are up or down, you'll discover practical investing strategies and expert insights so you have the knowledge to invest with confidence. The book is divided into five parts: Part I: The Essentials of Investing in Shares (including common approaches to investing in shares, assessing risks and getting to know the stock markets) Part II: Before You Start Buying (including gathering the right info, finding a stockbroker, investing for growth and investing for income) Part III: Picking Winners (including decoding company documents, analysing industries and seeking emerging sector opportunities) Part IV: Investment Strategies and Tactics (including choosing a strategy, trading techniques, using your broker, and a glimpse at what the insiders do!) Part V: The Part of Tens

Leseprobe

Investing in Shares For Dummies®, 2nd Edition

Visit www.dummies.com/cheatsheet/investinginsharesuk to view this books’ cheat sheet.

Table of Contents

Introduction

About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organised

Part I: The Essentials of Share Investing

Part II: Before You Start Buying

Part III: Picking Winners

Part IV: Investment Strategies and Tactics

Part V: The Part of Tens

Part VI: Appendixes

Icons Used in This Book

Where to Go from Here

Part I: The Essentials of Investing in Shares

Chapter 1: Exploring the Basics

Understanding the Basics

Getting Prepared before You Get Started

Knowing How to Pick Winners

Recognising the value of shares

Understanding how market capitalisation affects share values

Sharpening your investment skills

Boning Up on Strategies and Tactics

Getting Good Tips

Chapter 2: Sizing Up Your Current Finances and Setting Goals

Establishing a Starting Point

Step 1: Making sure you have an emergency fund

Step 2: Listing your assets in decreasing order of liquidity

Step 3: Listing your liabilities

Step 4: Calculating your net worth

Step 5: Analysing your balance sheet

It’s All about the Cash . . . (Flow)!

Step 1: Tallying up your income

Step 2: Adding up your outgoings

Step 3: Creating a cash flow statement

Step 4: Analysing your cash flow

Finding investment money in tax savings

Setting Your Sights on Your Financial Goals

Chapter 3: Defining Common Approaches to Investing in Shares

Matching Shares and Strategies with Your Goals

Investing for the Future

Focusing on the short term

Considering medium-term goals

Preparing for the long term

Investing for a Reason

Growth investing

Income investing

Investing in Your Personal Style

Cautious investing

Aggressive investing

Chapter 4: Assessing the Risks

Exploring Different Kinds of Risk

Financial risk

Interest rate risk

Understanding the adverse effects of rising interest rates

Market risk

Inflation risk

Tax risk

Political and governmental risks

Personal risks

Emotional risk

Minimising Your Risk

Gaining knowledge

Staying out . . . for now

Getting your financial house in order

Diversifying your investments

Weighing Risk against Return

Chapter 5: Getting to Know the Stock Markets

Knowing How Indices Are Measured

Using the Indices

Tracking the indices

Investing in indices

Checking Out Major Markets

The FTSE 100 Index

The FTSE 250

The FTSE All-Share

Markets for Smaller Companies

The Alternative Investment Market

Further afield: International indices

Part II: Before You Start Buying

Chapter 6: Gathering Information

Looking to Stock Exchanges for Answers

Understanding Shares and the Companies They Represent

Accounting for taste and a whole lot more

Understanding how economics affects shares

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 the politicians and government bureaucrats are doing

Checking for trends in society, culture and entertainment

Reading (and Understanding) the Financial Pages

52-week high

52-week low

Name and code

Dividend

Volume

Yield

P/E

Price

Change

Using News about Dividends

Looking at important dates

Understanding why these dates matter

Evaluating (Avoiding?) Investment Tips

Chapter 7: Finding a Stockbroker

Defining the Broker’s Role

Distinguishing between Advisory and Execution-only Brokers

Advisory brokers

Execution-only brokers

Choosing a Broker

Discovering Various Types of Brokerage Accounts

Cash accounts

Nominee accounts

Option accounts

Judging Brokers’ Recommendations

Chapter 8: Investing for Growth

Becoming a Value-orientated Growth Investor

Getting Tips for Choosing Growth Shares

Making the right comparison

Checking out a company’s fundamentals

Looking for leaders and megatrends

Considering a company with a strong niche

Noticing who’s buying and/or recommending the share

Learning investing lessons from history

Evaluating the management of a company

Exploring Small-caps and Speculative Shares

Avoiding new issues, unless . . .

Asking yourself if your small-cap’s making money

Recognising that investing in small-cap shares requires analysis

Chapter 9: Investing for Income

Understanding Income Shares

Advantages of income shares

Disadvantages of income shares

Analysing Income Shares

Understanding your needs first

Checking out yield

Checking the company’s dividend cover

Diversifying your shares

Examining the company’s bond rating

Exploring Typical Income Shares

Utilities

Real estate investment trusts (REITs)

Chapter 10: Using Basic Accounting to Choose Winning Shares

Recognising Value When You See It

Understanding different types of value

Putting the pieces together

Accounting for Value

Walking on a wire: The balance sheet

Looking at the P and L account

Playing around with ratios

Part III: Picking Winners

Chapter 11: Decoding Company Documents

Slices from the Big Cheese: The Annual Report

Analysing the annual report’s anatomy

Going through the proxy materials

Getting a Second Opinion

Company documents filed with the RNS

Standard and Poor’s

Moody’s Investment Service

Brokerage reports: The good, the bad and the ugly

Compiling Your Own Research Department

Chapter 12: Analysing Industries

Interrogating the Industries

Is the industry growing?

Are the industry’s products or services in demand?

What does the industry’s growth rely on?

Is this industry dependent on another industry?

Who are the leading companies in the industry?

Is the industry a target of government action?

Which category does the industry fall into?

Outlining Key Industries

For sale

Baby, you can drive my car

Thanking Mr Roboto

Banking on it

Chapter 13: Emerging Sector Opportunities

Charging at Bullish Opportunities

Commodities: Feeding and housing the world

Energy

Gold

Silver

Healthcare

National security

Hugging Tight with a Bearish Outlook

The great credit monster

Cyclical shares

Important Info for Bulls and Bears

Conservative and bullish

Aggressive and bullish

Conservative and bearish

Aggressive and bearish

Diversification

Chapter 14: Pounds, Prices and Politics

Sorting the Sound Information from the Soundbites

Understanding price controls

Ascertaining the political climate

Discovering systemic and non-systemic effects

Poking into politics: Resources

Easing into Economics

Understanding economic impact

Inquiring about economics: Resources

Part IV: Investment Strategies and Tactics

Chapter 15: Taking the Bull (Or Bear) by the Horns

Bulling Up

Recognising the beast

Avoiding the horns of a bull market

Toro! Approaching a bull market

Bearing Down

Identifying the beast

Heading into the woods: Approaching a bear market

Straddling Bear and Bull: Uncertain Markets

Pinpointing uncertainty is tough

Deciding whether you want to approach an uncertain market

Chapter 16: Choosing a Strategy That’s Just Right for You

Laying Out Your Plans

Living the bachelor life: Young, single, with no dependents

Going together like a horse and carriage: Married with children

Getting ready for retirement: Over 40 and single or married

Kicking back in the hammock: Already retired

Allocating Your Assets

Investors with less than £5,000

Investors with £5,000–25,000

Investors with £25,000 or more

Knowing When to Sell

Chapter 17: Using Your Broker and Trading Techniques

Checking Out Brokerage Orders

Condition-related orders

Time-related orders

Buying on Margin

Examining marginal outcomes

Contracts for difference (CFDs)

Going Short and Coming Out Ahead

Setting up a short sale

Oops! Going short when prices grow taller

Feeling the squeeze

Chapter 18: Getting a Handle on DPPs, DRIPs and PCA . . . ASAP

Being Direct with DPPs

Investing in a DPP

Finding DPP alternatives

Recognising that every pro has a con

Dipping into DRIPs

Getting a clue about compounding

Checking out the cost advantages

Weighing the pros and the cons

The One–Two Punch: Pound Cost Averaging and DRIPs

Chapter 19: Looking at What the Insiders Do: Corporate Capers

Tracking Insider Trading

Looking at Insider Transactions

Getting info from insider buying

Picking up tips from insider selling

Observing Corporate Share Buybacks

Boosting earnings per share

Beating back a takeover bid

Exploring the downside of buybacks

Staging a Comeback with Share Scrips

Ordinary share scrips

Reverse share scrips

Chapter 20: Tax Benefits and Liabilities

Paying through the Nose

Understanding income and capital gains tax

Coping with capital losses

Sharing Your Gains with the Tax Inspector

Filling out forms

Playing by the rules

Understanding There’s No Such Thing as a Free Share

Givin’ it away

Not banking on tax deductions

Taking Advantage of Tax Advantages

ISAs

Pensions

Chapter 21: Creating a Smarter Portfolio with Lower-Cost Funds

Understanding Why Costs Matter

Acting on the Advice of Academics

Considering Tracking an Index

Investigating the weird and wonderful world of indexes

Working out how to track your chosen index

Understanding that not all trackers are created equal

Adopting a core satellite approach

Understanding a Great Historical Institution: Investment Trusts

Deciding Whether Investment Trusts and Index Trackers Are Right For You

Part V: The Part of Tens

Chapter 22: Ten Warning Signs of a Share’s Decline

Earnings Slowdown

Sales Slowdown

Exuberant Analyst Reports that Defy Logic

Insider Selling

Dividend Cuts

Increased Negative Coverage

Industry Problems

Political Problems

Too High or Unsustainable Debt

Funny Accounting: No Laughing Here!

Chapter 23: Ten Signals of a Share Price Increase

Rise in Earnings

Increase in Assets Because Debts Are Stable or Decreasing

Positive Publicity for the Industry

Heavy Insider or Corporate Buying

Increased Attention from Analysts

Rumours of Takeover Bids

Consumer Desire for the Brand

Strong or Improving Bond Rating

Powerful Demographics

Low P/E Relative to Industry or Market

Chapter 24: Ten Ways to Protect Yourself from Fraud

Be Wary of Unsolicited Calls and Emails

Get to Know the FSA

Don’t Invest If You Don’t Understand

Question the Promise of Extraordinary Returns

Verify the Investment

Check Out the Broker

Beware of the Pump-and-Dump

Watch Out for Short-and-Abort

Remember That Talk Is Cheap (Until You Talk to an Expert)

Recovering (If You Do Get Scammed)

Chapter 25: Ten Challenges and Opportunities for Stock Market Investors

Debt, Debt and More Debt

Derivatives

Property

Inflation

Pension Crisis

Government’s Unfunded Liabilities

Recession and Depression

Energy

Dangers from Out of the Blue

The One Certainty

Part VI: Appendixes

Appendix A: Resources for Investors in Shares

Periodicals and magazines

Books and pamphlets

Special books of interest to share investors

General investing websites

Stock investing websites

Choosing brokers

Brokers

Earnings and earnings estimates

Industry analysis

Factors that affect market value

Technical analysis

Directors’ sharedealing and other tips

Appendix B: Financial Ratios and Accounting Terms

Current ratio

Quick ratio

Return on equity (ROE)

Return on capital employed (ROCE)

Debt to equity ratio

Working capital

Price-to-earnings ratio (P/E)

Price to sales ratio (PSR)

Price to book ratio (PBR)

EBITDA

Gearing

Cheat Sheet

Investing in Shares For Dummies®, 2ND EDITION

by David Stevenson and Paul Mladjenovic

Investing in Shares For Dummies®, 2nd Edition

Published by John Wiley & Sons, Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ England www.wiley.com

Copyright © 2012 John Wiley & Sons, Ltd, Chichester, West Sussex, England

Published by John Wiley & Sons, Ltd, Chichester, West Sussex

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About the Authors

David Stevenson is the Adventurous Investor columnist for the Financial Times and also writes the Contrarian column for trade newspaper Investment Week. He’s a regular contributor to the Investors Chronicle and to Money Management and has written a number of books on the subject of investing, including the main European book on investing in ETFs. In what’s left of his spare time David edits PortfolioReview, a free investment based online newsletter at www.portfolioreviewonline.com and tweets via #Advinvestor. If all that wasn’t enough David is also director of a number of media and technology companies including Coalition Labs, based in sunny Bournemouth, and was a founding director of The Rocket Science Group. He also finds some time to be a magistrate and to run his own investment portfolios.

Paul Mladjenovic is a certified financial planner practitioner, writer, and public speaker who has a Web site at www.mladjenovic.com. His business, PM Financial Services, has helped people with financial and business concerns since 1981. In 1985 he achieved his CFP designation. Since 1983, Paul has taught thousands of budding investors through popular national seminars such as ‘The $50 Wealthbuilder’ and ‘Stock Investing Like a Pro.’ Paul has been quoted or referenced by many media outlets such as Bloomberg, MarketWatch, CNBC, and many financial and business publications and Web sites. As an author, he has written the books The Unofficial Guide to Picking Stocks (Wiley, 2000) and Zero-Cost Marketing (Todd Publications, 1995). In 2002, the first edition of Stock Investing For Dummies was ranked in the top 10 out of 300 books reviewed by Barron’s. In recent years, Paul accurately forecasted many economic events, such as the rise of gold and the decline of the U.S. dollar. He maintains a financial database for his readers and students at www.supermoneylinks.com.

Dedication

For my beloved Fran, Adam, Joshua, and a loving, supportive family, I thank God for you.

I also dedicate this book to the millions of investors who deserve more knowledge and information to achieve lasting prosperity. – Paul Mladjenovic

Authors’ Acknowledgements

From Paul: First and foremost, I offer my appreciation and gratitude to the wonderful people at Wiley. It has been a pleasure to work with such a top-notch organization that works so hard to create products that offer readers tremendous value and information. I wish all of you continued success! There are some notables there whom I want to single out.

The first person is Jennifer Connolly (my project editor). She is a true publishing and writing professional who has been extremely helpful, understanding, and patient. Those words are not enough to express my thanks for her fantastic guidance. May God bless her growing family! (Jennifer took over in mid-stream for the wonderful Sherri Pfouts.)

Sarah Faulkner (my copy editor) has made sure my mish-mash of content is readable and professional (no small feat). I thank her sincerely and I am grateful she worked on this book with her impressive editing skills.

My gratitude goes out to the acquisitions editor Stacy Kennedy for making this For Dummies book happen. For Dummies books don’t magically appear at the bookstore, they happen due to the foresight and efforts of people like Stacy. Wiley is fortunate to have her (and the others also mentioned)!

Fran, Lipa Zyenska, you helped make those late nights at the computer more tolerable, and you helped me focus on the important things. Te amo and I thank God that you are by my side. With you and the rest of my loving family, I know that the future will be bright.

Lastly, I want to acknowledge you, the reader. Over the years, you have made the For Dummies books what they are today. Your devotion to these wonderful books created a foundation that played a big part in the creation of this book and many more yet to come. Thank you!

David Stevenson would like to thank Claire Ruston and Simon Bell from Wiley for all their help in revising this book, and Matthew Vincent at the FT for his constant encouragement – and repeated attempts to get me hooked on David Bowie’s music! Most of all he’d like to thank Vanessa and the ‘Stevenson pack’ – Rebecca, Zac and the hounds Jake and Harvey . . . not forgetting Mum of course who to this day doesn’t understand a word about investment and ‘all that stuff’. Sensible lady.

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Introduction

Houses, gold, tulips . . . our idea of what constitutes a good ‘investment’ has changed dramatically over time but one precious, valuable idea still holds true: that shares over the long term have been a great investment and have without doubt made their intrepid ‘holders’ returns of between 5 and 7 per cent per annum over many decades. Obviously that optimistic assessment requires a huge caveat, perhaps even a flashing warning sign of epic proportions, loudly proclaiming that investing in shares can be a rollercoaster ride! Anyone piling their hard-earned fortune into the stock market in 2007 would soon have realised that shares (also called equities or stocks) can be hugely volatile and that you can lose your money almost overnight. Remember the dark days of early winter 2008, when the financial markets stood on the edge of catastrophe and shares were plunging by 5 per cent one day and 10 per cent the next? Scary stuff, but within 12 months the markets had staged a remarkable recovery and some stocks – especially those of the big banks – had more than trebled in value. The moral of the story is simple: investing in shares can sometimes be fun, often risky, but also frequently rewarding, especially if you are patient, careful and diligent. This book can definitely help you avoid the mistakes others have made and can point you in the right direction.

Explore the pages of this book and find the topics that most interest you regarding the world of share investing. Understanding what not to do can be just as important as working out what to do. The single difference between success and failure, between gain and loss, boils down to one word: knowledge. Take this book as your first step in a lifelong learning adventure.