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The Forbes / CFA Institute Investment Course
Timeless Principles for Building Wealth
Vahan Janjigian (Author), Stephen M. Horan (Author), Charles Trzcinka (Author)
9780470919651, Wiley
Hardback, published 1 March 2011
288 pages
23.6 x 16.1 x 2.6 cm, 0.531 kg
The most up-to-date and all encompassing guide to investing in today's markets From Forbes and the CFA Institute-two of the most highly respected and recognized names in the investment industry-The Forbes/CFA Institute Investment Course is an interactive roadmap to investing in today's challenging stock markets. From building capital and asset allocation and diversification to choosing a broker and reading a financial statement, The Forbes/CFA Institute Investment Course has offered investors step-by-step guidance since 1948. The course With Q&A, links to videos, expert advice, interviews with top money managers, and much more, The Forbes/CFAInstitute Investment Course is the perfect resource for anyone looking to learn about investing in today's markets.
Preface xiii Acknowledgments xvii Chapter 1 Building Capital 1 Role of the Stock Market in Building Wealth 2 Determining Your Financial Position 3 Your Financial Inventory Guide 4 Investment Margin 11 Defining Your Goals 12 Return Requirements 13 Risk Profile 14 Life Cycle and the Risk/Return mix 15 Other Considerations 16 Asset Classes 17 Asset Allocation 20 Active versus Passive Investing 22 Diversification 23 Dollar Cost Averaging 24 Chapter Takeaways 31 Chapter 2 How Securities Markets Function 33 Role of Securities Markets 33 The Securities Exchanges 36 Over-the-Counter Markets 37 NASDAQ 38 Electronic Communication Networks 39 Stock Quotes 39 The Third Market 40 Other Markets 40 How the New York Stock Exchange Operates 41 How the NASDAQ Operates 43 From SOES to SuperMontage 44 OTC Bulletin Board and Pink Sheets 45 How the ECNs Operate 45 Crossing Systems 46 Electronic versus Floor Trading 46 Preferencing 48 Internalization 49 Chapter Takeaways 49 Chapter 3 Selecting a Broker and Trading 51 Structure of a Brokerage Firm 52 Activities of a Brokerage Firm 53 Services Offered by All Brokers 54 Full-Service versus Discount Brokers 55 Online Brokers 58 Choosing a Brokerage Firm 58 Commissions 60 Direct Purchase of Securities 62 Placing Orders 63 Odd-Lot Trading 66 Margin 67 Transaction Example 68 Settlement 69 Stock Symbols and the Ticker Tape 70 Questions to Ask Your Broker 71 Chapter Takeaways 73 Chapter 4 Tax-Favored Investment Strategies 75 Capital Gains and Dividends 75 Traditional IRAs 77 Roth IRAs 79 401(k) Plans 80 Education Savings Accounts and 529 Plans 82 Other Pension Plans 83 Mutual Funds and Taxes 85 Using Tax-Advantaged Accounts 86 Chapter Takeaways 87 Chapter 5 Reading Financial Statements 89 Income Statements 91 Balance Sheet 95 Statement of Cash Flows 99 Making Sense of the Numbers 102 Profitability Ratios 102 Asset Utilization Ratios 105 Leverage Ratios 108 Revisiting ROE 110 Liquidity Ratios 110 Market Multiples 112 Look Beyond the Numbers 114 Read the Footnotes 115 Can You Trust Financial Statements? 115 Chapter Takeaways 119 Chapter 6 Sources for Investment Information 121 Where to Obtain Information 123 Securities and Exchange Commission 124 Earnings Releases and Regulation Fair Disclosure 125 Investment Brokers and Dealers 127 Can You Trust Brokerage House Reports? 128 Investment Newsletters and Other Publications 129 Corporate Reports 130 Reading the Annual Report 130 Government Reports 131 Chapter Takeaways 131 Chapter 7 Common Stocks and Economic Indicators 133 Another Look at the Balance Sheet 133 Why Common Shares Have Value 136 Macroeconomic Factors 136 Industry-Specific Factors 140 Other Barometers 141 Evaluating Data 141 Chapter Takeaways 143 Chapter 8 Fundamental Analysis 145 Investing versus Trading 145 Passive Investing 146 Active Investing 147 Business Focus 153 Industry Outlook 154 Company Status 155 Major Trends 157 Earnings History and Outlook 158 Dividends 159 Price-Earnings and Price-Book Ratios Revisited 161 Discounted Cash Flow 163 Evaluating Management 164 Some Final Thoughts on Fundamental Analysis 165 Chapter Takeaways 165 Chapter 9 Technical Analysis 167 The Value of Charts 169 Reading Charts 171 Dow Theory 171 Head and Shoulders 175 Support and Resistance Levels 176 Trading Ranges 177 Breakaway Gaps 178 Importance of Volume 179 Other Technical Indicators 182 Time to Grow Bullish 184 Chapter Takeaways 187 Chapter 10 Fixed-Income Securities 189 Bonds 189 Understanding Bonds 190 Understanding Bond Prices 191 Bond Prices and Interest Rates 192 Call Feature 194 Credit Quality of Bonds 194 Other Issues Concerning Bonds 196 How to Buy Bonds 199 Money Market Securities 200 Preferred Stock 201 Understanding Preferred Stock 202 Tax Treatment 203 Trust Preferred Securities 204 Final Thoughts on Bonds and Preferred Stocks 204 Chapter Takeaways 205 Chapter 11 Derivatives 207 Defining Derivative Instruments 207 Futures 209 Spot Asset 209 The Futures Market 210 Delivery 211 Hedging 212 Stock Index Futures 212 Single-Stock Futures 214 Options 215 Definition of Options 216 Options Markets 216 Important Terms to Know 216 Listed Options 217 What an Option Is Worth 219 Commissions 221 To Sell or to Exercise 222 Some Popular Option Strategies 222 A Warning about Naked Option Writing 225 Chapter Takeaways 226 Chapter 12 Mutual Funds 229 An Investment Company 229 Closed-End or Open-End 230 A Short History of the Mutual Fund Industry 232 Categories of Mutual Funds 232 Advantages of Mutual Funds 237 Disadvantages of Mutual Funds 238 Mutual Fund Expenses 239 How to Choose a Fund 242 Some Final Thoughts about Mutual Funds 243 Hedge Funds 243 Chapter Takeaways 247 Chapter 13 Rules of Thumb and Key Phrases 249 Final Comments 254 Suggested Readings 255 About the Authors 257 Index 259
Subject Areas: Finance & accounting [KF]
