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The Complete Idiot's Guide® To Investing

Book Description

A penny saved may be a penny earned, but a penny invested can be even more.

In this financial crisis, old advice about equities, mutual funds, commodities, and real estate may no longer hold. Here is a fresh look at all aspects of investing to help readers protect and grow their wealth. This edition includes the most current information on: corporate fundamentals; the sub-prime crisis and its effects; practical tools for evaluating mutual funds; advice about riding the equity market; and the use of Exchange Traded Funds.

Table of Contents

  1. Title Page
  2. Dedication
  3. Copyright Page
  4. Introduction
  5. Part 1 - What Does “Financial Security” Mean to You?
    1. Chapter 1 - Bubbles and Bailouts: Understanding the Financial Crisis
      1. The Old-School Mortgage
      2. New Mortgage Products Set the Stage for the Housing Bubble
      3. Enter the Flippers
      4. The Bubble Bursts
      5. Dodging Financial Bubbles
      6. How the Government Contributed to the Financial Crisis
      7. Bailout Basics
    2. Chapter 2 - Put Your Money to Work for You
      1. Putting Money to Work Is the Essence of Investing
      2. The Miracle of Compounding
      3. How Compounding Makes the Difference
      4. An Easy Way to Figure Compound Interest
      5. The “Blow-Your-Mind-by-Adding-Time” Chart
      6. The 10 Percent Habit
      7. Become an Educated Investor, Not Just a Consumer
      8. Time, Risk, and Your Sanity
      9. The Fed’s Balancing Act: Dampening Inflation Without Dumping on Us
    3. Chapter 3 - How Do You Really Feel About Risk?
      1. What Is Return?
      2. What You Made, What You Paid
      3. Fear of Heights: The Higher the Return, the Greater the Risk
      4. The Tools of the Trade
      5. The Three Broad Investment Classes
      6. Variety Is the Spice of Life
      7. Quiz Thyself to Know Thyself: Risk Tolerance Quiz
      8. Got the Time? Take the Time Horizon Quiz
    4. Chapter 4 - Selecting Your Investing Objectives and Style
      1. Just-in-Case Cash
      2. How Can I Bring Home the Bacon, Fry It Up in a Pan, and Have Some Left Over?
      3. How Gold Do You Want Your Golden Years to Be?
    5. Chapter 5 - What Do You Have Right Now—and What Will You Need to Retire?
      1. So What Will Social Security Do for Me, Anyway?
      2. Time to Pester Human Resources
      3. Help, I’m Self-Employed!
      4. Creating Your Own Fabulous Pension Plan
      5. A Super-Easy Way to Figure Out How Much You Need to Save
      6. Use the 401(k) Plan, Stan
      7. Get an IRA!
      8. Trust Us, You Really Don’t Want to Wait
      9. But My Circumstances Will Change… Won’t They?
      10. Stagger Your Debt
      11. Your Personal Balance Sheet: A Snapshot of Your Finances
  6. Part 2 - Creating a Plan
    1. Chapter 6 - Retirement Plans 101
      1. If You Aren’t Planning for Retirement Yet, You’re Not Alone
      2. Defined Benefit Plans
      3. Defined Contribution Plans
      4. 401(k) and 403(b) Plans
      5. Contribution Limits
      6. Should You Put All Your Eggs in the Company Basket? Ask the Folks at Enron …
      7. What About Stock Options? Go for It.
      8. Individual Retirement Accounts
      9. Old Faithful: The Traditional IRA
      10. The Flexible Roth IRA
      11. Avoiding the 10 Percent Early Withdrawal Penalty
      12. Which IRA Is Right for Me?
      13. Traditional and Roth IRA Contribution Limits
    2. Chapter 7 - Solving Debt and Credit Problems
      1. What Does Your Credit Report Say About You?
      2. CRA Horror Stories
      3. How to Check Your Credit Reports
      4. Debit Cards: A Better Choice?
      5. The Mysteries of Your FICO Score
      6. Should I Pay Off My Debt or Invest?
    3. Chapter 8 - Home Ownership: What You Need to Know
      1. The Down Payment
      2. Timing Is Everything
      3. Re-Fi Mania
      4. Evaluate Your Mortgage-Worthiness Before a Banker Does
      5. Compare Renting to Owning
      6. Over Time, Owning Should Save You Money
      7. Renting Pluses
      8. How Much of Your Income Should You Spend on Housing?
      9. Fixed-Rate vs. Adjustable-Rate Mortgage
      10. I.O. for U?
      11. The Costs of Closing
      12. Second Mortgages: Pros and Cons
      13. Pluses and Pitfalls of Paying Off Your Mortgage
      14. Should You Shorten Your Mortgage?
      15. The Relocation Package
      16. Renting Out Your Home When You Move
      17. Real Estate Agents
      18. Closing the Deal
    4. Chapter 9 - Funding Your Own (or Your Child’s) Education
      1. An Overview of College Costs
      2. An Investment That Really Pays
      3. Put Your Financial Security First
      4. Establishing an Education Fund
      5. Using a Traditional or Roth IRA to Save for College
      6. Coverdell Education Savings Accounts (ESAs)
      7. Qualified Tuition Programs (Section 529s)
      8. Pros and Cons of 529 Plans
      9. Tax Breaks for Education Expenses
      10. Patriot Bonds (formerly EE Savings Bonds)
      11. Other Options
      12. Sorting Out All the Options
      13. In Whose Name?
  7. Part 3 - 3 Investing 101
    1. Chapter 10 - What Are They Up to on Wall Street, Anyway?
      1. The Purpose of Wall Street
      2. The Stock Exchanges
      3. The Securities and Exchange Commission (SEC)
      4. What’s With All the Animal References?
      5. But What Do All Those Numbers Mean?
      6. The Key to Your Stock Knowledge: Price-Earnings Ratios
      7. Look into My P/E Crystal Ball
      8. Should You Play with the Big Kids or Just Get a Piggyback Ride?
      9. Asset Allocation/Rebalancing
      10. How Much Stock Should Be in Your Portfolio?
      11. Dollar Cost Averaging, or How to Own Stocks and Stay Happy
      12. The Two Secrets of Successful Investing
      13. Choosing a Broker
      14. Placing a Trade with Your Broker
      15. Asset Management Accounts
      16. Financial Advisors
    2. Chapter 11 - How to Invest in Individual Stocks … Not That We Recommend It!
      1. Trading Tips
      2. When Should You Buy Stock?
      3. If You Buy It, You’d Better Love It
      4. The Biggest “Do” of All: Invest in Quality
      5. Researching Individual Stocks
      6. All the News That’s Fit to Print: Company Annual Reports
      7. Dividends: How Companies Share the Wealth
      8. The Truth About Stock Splits
      9. Diversifying Your Stock Portfolio: How Many Holdings Are Enough?
      10. We’re Not Talking About Leaky Faucets: Investing Through DRIPs
      11. Changed Your Mind About Being Your Own Securities Analyst?
    3. Chapter 12 - Slow and Steady Wins the Race: Fixed-Income Securities
      1. What Are Fixed-Income Securities For?
      2. When Do You Get That Groovy Interest Income?
      3. The Wonderful World of Bond (No, Not James)
      4. A Simple Rule for Deciding How Much of Your Portfolio to Keep in Bonds
      5. Corporate Debt—An Unwise Choice for Small Investors
      6. Treasuries—Smart Alternative to Corporate Debt
      7. An Old Favorite: Savings Bonds
      8. Agency-O-Rama
      9. CDs: A Viable Alternative to Government Debt
      10. Municipal Bonds
      11. Money Market Funds
    4. Chapter 13 - Preferred Stock: A Hybrid of Wall Street
      1. What Do You Get When You Mix Stocks with Bonds?
      2. It Just Doesn’t Make Sense
      3. Bolstering Capital
      4. It’s a Family Affair
      5. What to Look for in a Preferred Stock
      6. Riding with the Top Down: Convertible Preferred Stock
    5. Chapter 14 - Navigating the Mutual Fund Universe
      1. What Exactly Are Mutual Funds?
      2. Open-End and Closed-End Funds
      3. Avoid Load Funds
      4. Index and Tax-Advantaged Funds
      5. Exchange-Traded Funds
      6. HOLDRs: An Alternative to ETFs
      7. What’s out There in the Fund Universe?
      8. Why Funds Are a Great Investment Option
      9. How to Pick a Winning Mutual Fund
      10. Money Market Funds
      11. Lifestyle and Tax-Efficient Funds
      12. Pick a Date to Rebalance Your Mutual Fund Holdings Annually
    6. Chapter 15 - Investing in Real Estate: Pros and Cons
      1. Why Own Real Estate?
      2. Advantages of Investing Through REITs
      3. Types of REITs
      4. Not All REITs Are Alike
      5. REIT Resources
      6. Four Types of Real Estate Ownership
      7. Eight Basic Forms of Real Estate
      8. Purchase and Rental of Homes and Apartment Buildings
      9. Location, Location, Location
      10. How Rental Income Hits Your Tax Return
  8. Part 4 - Rolling with Life’s Changes
    1. Chapter 16 - Work Smart, Not Just Hard: Getting the Max from Your Job
      1. What to Ask a New Employer
      2. Transferring Retirement Accounts
      3. So You’re Your Own Boss
      4. Retirement … at Last!
      5. How the Retirement Age You Choose Affects Social Security
      6. Pay Tax on Social Security Benefits? Sad, but True
      7. Can You Work and Still Collect Social Security?
      8. Advantages to Delaying Retirement
      9. When and How to Apply for Your S.S. Benefits
      10. How Does Medicare Work?
      11. What About Lump-Sum Retirement Benefits?
    2. Chapter 17 - The Ramifications of Romance
      1. When You Need a Pre-Nup
      2. The Marriage Tax Becomes the Marriage Bonus
      3. Joint Bank Accounts
      4. Should You Keep Separate Investment Portfolios?
      5. Untangling Your Assets During Divorce
      6. QDROs—How to Split Retirement Assets When You Split
      7. Negotiate with Your Head, Not Your Spleen
      8. Other Divorce Options
    3. Chapter 18 - Cutting Expenses Is Investing
      1. Become a Hunter/Gatherer
      2. Your Tax Bracket Is Higher Than You Think
      3. Risk-Free Saving Where You Least Expect It
      4. Buying Bulk Is a Great Investment
      5. Your Car: Leasing vs. Ownership
      6. Choosing a Bank
      7. Knocking Down Real Estate Taxes
      8. Credit Cards
    4. Chapt er 19 - Covering Your Assets
      1. Don’t Insure What You Can Afford to Replace
      2. Life Insurance Simplified
      3. Term Life Insurance
      4. Annuities
      5. Your Kids Don’t Need Life Insurance
      6. Insuring Your Home and Other Assets
  9. Part 5 - 5 Advanced Investing Strategies
    1. Chapter 20 - Keeping Uncle Sam’s Mitts off Your Assets
      1. Why You Don’t Want to Die Without a Will
      2. Probate: The Process of Administering Your Will
      3. Estate Tax Repealed in 2010!
      4. Tax-Saving Alternatives
      5. Other Ways to Reduce Estate Taxes
      6. What If You Inherit Money?
    2. Chapt er 21 - Hedging Your Options
      1. Weighing Your Options
      2. Puts and Calls
      3. How Did This Get Started?
      4. Risk-Loving Speculator Seeks Cautious Hedgehog
      5. In the Money
      6. Reading an Options Table
      7. Selling Short vs. Trading Options
      8. Risky Business
      9. Option Strategies That Protect Your Stock Positions
      10. Stock Index Options
      11. The Braveheart of Wall Street
      12. LEAPS
    3. Chapter 22 - Fancy Futures
      1. What Is a Commodity?
      2. It All Began with Farmers
      3. How a Future Differs from an Option
      4. How Margins Work
      5. Using Futures to Offset Uncertainty
      6. Financial Futures
      7. Options on Futures—Oy!
      8. Spread Strategies for Speculators
      9. Gold Nuggets
    4. Chapter 23 - Alternative Investments
      1. How Regular Folk Discovered Alternative Investments
      2. Hedge Funds
      3. Venture Capital and LBO Funds
      4. The Private Equity Fund of Funds
      5. Pros and Cons of LP Investments
  10. Appendix A - Glossary
  11. Appendix B - Useful Investing Information
    1. Government and Regulatory Contacts
    2. Financial Exchanges
    3. Credit-Reporting Agencies
    4. Consumer Information
    5. Investment Research
    6. Online Articles, Tutorials, and Research Sites
    7. Internet Brokers
    8. Mortgages
  12. Appendix C - Quick Reference Points
    1. 11 Investment Rules of Thumb
    2. Investment Math Made Easy
  13. Index