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Investing 101: Updated and Expanded

Book Description

People wanting basic advice about stocks, bonds, mutual funds, retirement planning, and tax strategies are often frustrated by information overload. Picking the right book seems as daunting as deciding what to do with their savings and investments.

Investing 101: Updated and Expanded removes both roadblocks, putting people on a path that they can understand and stick with. Kristof is renowned for taking the mystery and anxiety out of investing by keeping choices manageable.

Kristof walks readers through the entire investment cycle and the way they think of their financial lives, rather than presenting stand-alone concepts like stocks and real estate. This expanded edition has new information about 529 college savings plans, annuities, Roth IRAs, reverse mortgages, and why declining markets can be good for you. It includes a cautionary look at home mortgages as investments. There's even a portfolio for the lazy investor.

Kristof's loyal readership and the success of this book's first edition demonstrate that she understands what's on the minds of investors as intimately as she knows what's happening in financial markets.

Winner: Cover and Interior Design, The Bookbinders Guild of New York/2009 New York Book Show Awards

Table of Contents

  1. Copyright
  2. Praise for Investing 101
  3. ACKNOWLEDGMENTS
  4. INTRODUCTION
    1. QUICK TAKE
      1. What You'll LEARN
      2. What You'll DO
      3. How You'll USE This
  5. 1. FIXING MONEY PROBLEMS
    1. 1.1. UNIVERSAL PROBLEMS
      1. 1.1.1. MONTHLY BUDGET
    2. 1.2. FOR WOMEN ESPECIALLY
    3. 1.3. FOR MEN ESPECIALLY
    4. 1.4. QUICK TAKE
      1. 1.4.1. What You'll LEARN
      2. 1.4.2. What You'll DO
      3. 1.4.3. How You'll USE This
  6. 2. RISK AND REWARD
    1. 2.1. UNDERSTANDING MARKET RISKS
    2. 2.2. CONSIDERING RATES OF RETURN
    3. 2.3. WHY A BAD MARKET COULD BE GOOD FOR YOU
    4. 2.4. HOW MUCH INVESTMENT RISK CAN YOU TOLERATE?
    5. 2.5. RISK QUIZ
    6. 2.6. The Bare Facts About the Variability of Investment Returns
    7. 2.7. QUICK TAKE
      1. 2.7.1. What You'll LEARN
      2. 2.7.2. What You'll DO
      3. 2.7.3. How You'll USE This
  7. 3. THE STARTING POINT
    1. 3.1. ALLOCATING ASSETS BASED ON GOALS
    2. 3.2. IDENTIFYING INVESTMENT CATEGORIES
    3. 3.3. IDENTIFYING FINANCIAL GOALS
    4. 3.4. RUNNING THE NUMBERS
      1. 3.4.1.
        1. 3.4.1.1. Goal: Emergency Money
        2. 3.4.1.2. Disaster Centra l: Delineating Potential Emergencies
        3. 3.4.1.3. Goal: Saving for a Car
        4. 3.4.1.4. Goal: Buying a House
      2. 3.4.2. Goal: House (Future Value of Savings)
      3. 3.4.3. Goal: House (Additional Savings Needed)
        1. 3.4.3.1. Goal: Paying for College
      4. 3.4.4. Goal: College (Future Value of Savings)
      5. 3.4.5. Goal: College (Additional Savings Needed)
      6. 3.4.6. College Cost Calculator
        1. 3.4.6.1. Total amount of monthly savings needed
        2. 3.4.6.2. Goal: Freedom and Options
        3. 3.4.6.3. Goal: Retirement
      7. 3.4.7. Goal: Retirement (Inflation-Adjusted Budget)
      8. 3.4.8. Goal: Retirement (Future Value of Savings)
      9. 3.4.9. Goal: Retirement (Required Monthly Savings)
        1. 3.4.9.4. Goal: Regular Income
    5. 3.5. QUICK TAKE
      1. 3.5.1. What You'll LEARN
      2. 3.5.2. What You'll DO
      3. 3.5.3. How You'll USE This
  8. 4. DIVERSIFICATION
    1. 4.1. INVESTING FOR SAFETY
      1. 4.1.1.
        1. 4.1.1.1. Bank Deposits
        2. 4.1.1.2. Money Market Mutual Funds
        3. 4.1.1.3. Short-Term Treasury Securities
    2. 4.2. INVESTING FOR INCOME
      1. 4.2.1.
        1. 4.2.1.1. Certificates of Deposit
        2. 4.2.1.2. Treasury Notes
        3. 4.2.1.3. Treasury Bonds
        4. 4.2.1.4. Ginnie Maes
        5. 4.2.1.5. CMOs
        6. 4.2.1.6. Corporate Bonds
        7. 4.2.1.7. Municipal Bonds
        8. 4.2.1.8. REITs
        9. 4.2.1.9. Preferred Stocks
        10. 4.2.1.10. Income Stocks
        11. 4.2.1.11. Closed-End Funds
        12. 4.2.1.12. Immediate Annuities
    3. 4.3. INVESTING FOR GROWTH
      1. 4.3.1.
        1. 4.3.1.1. Domestic Stocks
        2. 4.3.1.2. Foreign Stocks
        3. 4.3.1.3. Equity Mutual Funds
        4. 4.3.1.4. Global/International Mutual Funds
    4. 4.4. INVESTMENTS THAT PROTECT YOU FROM INFLATION
      1. 4.4.1.
        1. 4.4.1.1. Precious Metals
        2. 4.4.1.2. Residential Real Estate
        3. 4.4.1.3. Real-Return Bonds
        4. 4.4.1.4. "I" Savings Bonds
    5. 4.5. SPECULATION
      1. 4.5.1.
        1. 4.5.1.1. Viatical Settlements
    6. 4.6. INVESTMENTS TO AVOID
      1. 4.6.1.
        1. 4.6.1.1. Commodities Futures
        2. 4.6.1.2. Limited Partnerships
        3. 4.6.1.3. "Naked" Options
        4. 4.6.1.4. Other Investments You Don't Understand
    7. 4.7. QUICK TAKE
      1. 4.7.1. What You'll LEARN
      2. 4.7.2. What You'll DO
      3. 4.7.3. How You'll USE This
  9. 5. PICKING INDIVIDUAL STOCKS
    1. 5.1. FUNDAMENTAL INDICATORS OF VALUE
    2. 5.2. HOW TO READ A FINANCIAL STATEMENT
      1. 5.2.1.
        1. 5.2.1.1. What You Need
        2. 5.2.1.2. Where to Start
        3. 5.2.1.3. Last Step
    3. 5.3. FERRETING OUT THE RIGHT NUMBERS IN FINANCIAL REPORTS
      1. 5.3.1.
        1. 5.3.1.1. Is It a Buy?
    4. 5.4. CORPORATE GOVERNANCE
    5. 5.5. FINDING FINANCIAL DATA ON THE WEB
    6. 5.6. MANIC MARKETS
      1. 5.6.1.
        1. 5.6.1.1. Net Mania
        2. 5.6.1.2. The Dot-Com Business Model
    7. 5.7. WHY I LOVE COSTCO
    8. 5.8. QUICK TAKE
      1. 5.8.1. What You'll LEARN
      2. 5.8.2. What You'll DO
      3. 5.8.3. How You'll USE This
  10. 6. TOUGH SELL
    1. 6.1. KEEPING AN EYE ON THE FINANCIALS
    2. 6.2. WHAT ABOUT STOCK PRICE MOVEMENT?
    3. 6.3. TAX IMPLICATIONS OF SELLING AT A PROFIT
    4. 6.4. CALCULATING THE BREAK-EVEN SALES PRICE
    5. 6.5. RUNNING THE NUMBERS
      1. 6.5.1.
        1. 6.5.1.1. Calculating the Tax Implications of Selling Too Soon
    6. 6.6. QUICK TAKE
      1. 6.6.1. What You'll LEARN
      2. 6.6.2. What You'll DO
      3. 6.6.3. How You'll USE This
  11. 7. INVESTING IN BONDS
    1. 7.1. FIXED-INCOME INVESTMENT CHOICES
      1. 7.1.1.
        1. 7.1.1.1. Bonds for Diversification
      2. 7.1.2. Risks
    2. 7.2. QUICK TAKE
      1. 7.2.1. What You'll LEARN
      2. 7.2.2. What You'll DO
      3. 7.2.3. How You'll USE This
  12. 8. MUTUAL FUNDS
    1. 8.1. WHAT IS A MUTUAL FUND?
      1. 8.1.1.
        1. 8.1.1.1. Following the Money
    2. 8.2. FEES AND LOADS
    3. 8.3. THE PROSPECTUS
      1. 8.3.1.
        1. 8.3.1.1. Performance
        2. 8.3.1.2. Investment Objectives
        3. 8.3.1.3. Risks
    4. 8.4. DIFFERENT TYPES OF FUND CATEGORIES
    5. 8.5. CHOOSING SPECIFIC FUNDS IN EACH CATEGORY
      1. 8.5.1.
        1. 8.5.1.1. Active Versus Passive Management
        2. 8.5.1.2. Finding and Researching Funds
    6. 8.6. FUND FAMILIES
    7. 8.7. SELECTING A FUND
      1. 8.7.1.
        1. 8.7.1.1. Picking a Fund That Suits You
    8. 8.8. THE REAL COST OF FUND FEES
    9. 8.9. EXCHANGE-TRADED FUNDS
    10. 8.10. QUICK TAKE
      1. 8.10.1. What You'll LEARN
      2. 8.10.2. What You'll DO
      3. 8.10.3. How You'll USE This
  13. 9. SOCIALLY RESPONSIBLE INVESTING
    1. 9.1. EVOLVING INFLUENCE
    2. 9.2. PROMISING PERFORMANCE
    3. 9.3. SOCIAL FUND SCREENS
    4. 9.4. FINDING MUTUAL FUNDS WITH A SOCIALLY RESPONSIBLE BENT
    5. 9.5. QUICK TAKE
      1. 9.5.1. What You'll LEARN
      2. 9.5.2. What You'll DO
      3. 9.5.3. How You'll USE This
  14. 10. REAL ESTATE INVESTMENT TRUSTS
    1. 10.1. WHAT REITs ARE
      1. 10.1.1.
        1. 10.1.1.1. Income
        2. 10.1.1.2. Taxes
        3. 10.1.1.3. Risks
        4. 10.1.1.4. Performance
        5. 10.1.1.5. Volatility
        6. 10.1.1.6. Rewards
        7. 10.1.1.7. Real Estate Exposure
    2. 10.2. HOW TO INVEST IN REITs
    3. 10.3. QUICK TAKE
      1. 10.3.1. What You'll LEARN
      2. 10.3.2. What You'll DO
      3. 10.3.3. How You'll USE This
  15. 11. INTERNATIONAL INVESTING
    1. 11.1. THE EFFECTS AND RISKS ON DIVERSIFIED PORTFOLIOS
      1. 11.1.1.
        1. 11.1.1.1. Volatility
        2. 11.1.1.2. Currency Risk
    2. 11.2. INTERNATIONAL MUTUAL FUNDS AND RELATED INVESTMENT VEHICLES
      1. 11.2.1.
        1. 11.2.1.1. The "Buy American" Approach to Foreign Investment
    3. 11.3. ALL ABOUT CURRENCY RISK
    4. 11.4. QUICK TAKE
      1. 11.4.1. What You'll LEARN
      2. 11.4.2. What You'll DO
      3. 11.4.3. How You'll USE This
  16. 12. TAX-FAVORED INVESTING
    1. 12.1. DECREASING THE TAX BURDEN
      1. 12.1.1. RUNNING THE NUMBERS
    2. 12.2. TAX-FAVORED VERSUS TAXABLE INVESTING
    3. 12.3. SAVING OPTIONS
    4. 12.4. COLLEGE SAVINGS ACCOUNTS
      1. 12.4.1.
        1. 12.4.1.1. Coverdell Accounts
        2. 12.4.1.2. 529 Plans
        3. 12.4.1.3. Where Have All the UTMAs and UGMAs Gone?
    5. 12.5. RETIREMENT ACCOUNTS
      1. 12.5.1.
        1. 12.5.1.1. 401(k) Plans
        2. 12.5.1.2. Roth IRAs
        3. 12.5.1.3. Traditional IRAs
        4. 12.5.1.4. Tough Choices
        5. 12.5.1.5. 403(b) and 457 Plans
        6. 12.5.1.6. Simple Plans
        7. 12.5.1.7. Simple IRAs, SEP IRAs, Keoghs, and Self-Employed 401(k) Plans
        8. 12.5.1.8. Retirement Savings Contribution Credit
        9. 12.5.1.9. Tax-Deferred Annuities
        10. 12.5.1.10. Growth Stocks
        11. 12.5.1.11. Municipal Bonds
    6. 12.6. QUICK TAKE
      1. 12.6.1.
        1. 12.6.1.1. What You'll LEARN
        2. 12.6.1.2. What You'll DO
        3. 12.6.1.3. How You'll USE This
  17. 13. STARTING SMALL
    1. 13.1. HOW TO START SMALL
    2. 13.2. OTHER OPTIONS FOR SMALL INVESTMENTS
      1. 13.2.1.
        1. 13.2.1.1. Mutual Funds
        2. 13.2.1.2. Individual Stocks
    3. 13.3. THE COST OF DELAYS
    4. 13.4. QUICK TAKE
      1. 13.4.1. What You'll LEARN
      2. 13.4.2. What You'll DO
      3. 13.4.3. How You'll USE This
  18. 14. THE LAZY INVESTOR'S PORTFOLIO PLANNER
    1. 14.1. STEP ONE: DETERMINE WHAT YOU HAVE
      1. 14.1.1. CASH
      2. 14.1.2. INCOME INVESTMENTS
      3. 14.1.3. GROWTH INVESTMENTS
      4. 14.1.4. REAL ESTATE
      5. 14.1.5. DEBT
    2. 14.2. STEP TWO: DETERMINE WHAT YOU NEED
      1. 14.2.1.
        1. 14.2.1.1. Short-Term Goals
        2. 14.2.1.2. Medium-Term Goals
        3. 14.2.1.3. Long-Term Goals
    3. 14.3. STEP THREE: CHOOSE SPECIFIC INVESTMENTS
      1. 14.3.1.
        1. 14.3.1.1. Cash
        2. 14.3.1.2. Income
        3. 14.3.1.3. Growth
        4. 14.3.1.4. How Should This Look?
    4. 14.4. STEP FOUR: REBALANCE YOUR PORTFOLIO
    5. 14.5. QUICK TAKE
      1. 14.5.1.
        1. 14.5.1.1. What You'll LEARN
        2. 14.5.1.2. What You'll DO
        3. 14.5.1.3. How You'll USE This
  19. 15. HOW TO FIX YOUR BROKEN RECORDS
    1. 15.1. GETTING ORGANIZED
    2. 15.2. KEEPING TABS ON YOUR INVESTMENTS
      1. 15.2.1. INVESTMENT RECORD
    3. 15.3. QUICK TAKE
      1. 15.3.1.
        1. 15.3.1.1. What You'll LEARN
        2. 15.3.1.2. What You'll DO
        3. 15.3.1.3. How You'll USE This
  20. 16. GETTING HELP
    1. 16.1. CHOOSING AMONG FINANCIAL PLANNERS
      1. 16.1.1. The ADV Form
    2. 16.2. UNDERSTANDING PROFESSIONAL DESIGNATIONS
      1. 16.2.1. Beware the "Senior Specialist"
    3. 16.3. FINDING A PLANNER
    4. 16.4. HIRING A PLANNER
  21. glossary
  22. ABOUT THE AUTHOR
  23. ABOUT BLOOMBERG