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The Financial Times Guide to Investing, 3rd Edition

Book Description

'The most damaging half truth for savers is “performance matters more than expenses”. Read this book carefully and the financial services industry will have one fewer easy victim, but you will have a sound base for a lifetime of successful investment.'
Martin White, Chair of UK Shareholders Association

 

This is one of those great big books to buy and then tuck away for constant reference. It's a tour through everything from managing a portfolio to establishing a fair intrinsic value for a share. If it moves in the world of investing, it’s probably here.'

David Stevenson, 'Adventurous Investor' in the Financial Times

 

Informative and easy to read, Glen Arnold has produced arguably the most comprehensive book there is today on stock market investing and one that unquestionably will give an edge to any retail investor. This is a must read for anyone serious about investing.'  

Simon Thompson, Companies Editor, Investors Chronicle

 

The Financial Times Guide to Investing is the definitive introduction to the art of successful stock market investing. Bestselling author Glen Arnold takes you from the basics of what investors do and why companies need them through to the practicalities of buying and selling shares and how to make the most from your money. He describes different types of investment vehicles and advises you on how to be successful at picking companies, understanding their accounts, managing a sophisticated portfolio, measuring performance and risk and setting up an investment club.

 

The third edition of this investing classic will give you everything you need to choose your shares with skill and confidence. Thoroughly updated, this edition now includes:

 

- Comprehensive advice about unit trusts and other collective investments

- A brand new section on dividend payments and what to watch out for

- An expanded jargon-busting glossary to demystify those complex phrases and concepts

- Recent Financial Times articles and tables to illustrate and expand on case studies and examples

- Detailed updates of changes to tax rates and legislation as well as increases in ISA allowances and revisions to capital gains tax

 

Table of Contents

  1. Cover
  2. Title page
  3. Dedication
  4. Contents
  5. About the author
  6. Acknowledgements
  7. Publisher’s acknowledgements
  8. What’s new in the third edition
  9. Introduction
  10. part 1 Investment basics
    1. 1 What is investment?
      1. Partnerships
      2. Limited liability
      3. Ordinary shares and extraordinary returns
      4. Shareholder rights
      5. A money-making machine
      6. Dividends and retained earnings
      7. What if I want to sell?
      8. Primary and secondary markets
      9. Bonds
      10. Capital structure
      11. Stocks and shares
      12. Rights issues
      13. Financial institutions
      14. Be proud to be a capitalist!
      15. A note of warning – investment and speculation
    2. 2 The rewards of investment
      1. Becoming a millionaire
      2. Simple and compound interest
      3. How well have investors fared in the past?
      4. The importance of income
      5. International comparison
      6. Equities versus gilts
      7. What about risk?
      8. Closing comment
      9. Further reading
    3. 3 Stock markets
      1. What is a stock market?
      2. Brokers and market makers
      3. Pricing – good old supply and demand
      4. A short history of the London Stock Exchange
      5. ‘Big Bang’
      6. The international scene
      7. Variety of securities traded
      8. LSE’s primary market
      9. The secondary market
      10. The Main Market (The Official List)
      11. The Alternative Investment Market
      12. techMARK and techMARK mediscience
      13. ICAP Securities & Derivatives Exchange (ISDX)
      14. Who owns UK shares?
      15. The role of stock exchanges
      16. Useful websites
    4. 4 Buying and selling shares
      1. Stockbroker services
      2. Choosing a stockbroker
      3. Finding prices and other information
      4. Getting the most out of financial websites
      5. What happens when I buy or sell shares?
      6. An alternative mechanism
      7. A third trading system – SETSqx
      8. What happens after dealing?
      9. Ways of paying for your shares
      10. Internet dealing
      11. Direct market access
      12. Transferring shares without brokers
      13. Useful websites for further reading
  11. part 2 The investment spectrum
    1. 5 Pooled investments
      1. Unit trusts
      2. Open-ended investment companies (OEICs)
      3. Exchange traded funds (ETFs)
      4. Investment trusts (investment companies)
      5. Investment platforms/supermarkets
      6. With-profits policies
      7. Insurance company bonds
      8. Stock-market-linked bonds
      9. Money markets
      10. Hedge funds
      11. Bringing home the significance of high fees
    2. 6 Bonds
      1. Gilts
      2. Corporate bonds
      3. Credit rating
      4. High-yield (junk) bonds
      5. Convertible bonds
      6. Foreign bonds
      7. Eurobonds
    3. 7 Unusual share investments
      1. Business angels (informal venture capitalists)
      2. Venture capital and other private equity
      3. Private equity categories
      4. Overseas shares
      5. Preference shares
    4. 8 Options
      1. What is a derivative?
      2. What is an option?
      3. Share options
      4. Call option holders (call option buyers)
      5. Call option writers
      6. An example of an option writing strategy
      7. LIFFE share options
      8. Put options
      9. How to trade options
      10. Using share options to reduce risk: hedging
      11. Using options to reduce losses
      12. Index options
      13. Further reading
      14. Websites
    5. 9 Futures
      1. Marking to market and margins
      2. Settlement
      3. Equity index futures
      4. Buying and selling futures
    6. 10 pread betting, contracts for difference and warrants
      1. Spread betting
      2. Contracts for difference
      3. Warrants
      4. Covered warrants
      5. Further reading
      6. Websites
  12. part 3 Company analysis
    1. 11 Company accounts
      1. Oh no! Not numbers again!
      2. How to obtain reports
      3. The report and accounts
      4. Profit and loss account
      5. Balance sheet (statement of financial position)
      6. Cash flow statement
      7. Chairman’s statement
      8. Chief executive’s review
      9. Financial review
      10. Directors’ report and business review
      11. Auditors’ report
      12. Five-year summary
      13. Trading statements
      14. Further reading
    2. 12 Key investment ratios and measures
      1. From the financial pages
      2. Performance ratios and measures
      3. Financial health ratios and measures
      4. Forward-looking measures
      5. Further reading
    3. 13 Tricks of the accounting trade
      1. Goodwill
      2. Fair value
      3. What was our revenue again?
      4. Exceptional items
      5. Stock (inventory) valuation
      6. Depreciation
      7. Capitalisation
      8. Off-balance-sheet items
      9. Share (stock) options
      10. Missing the profits and assets in investee companies
      11. Other tricks
      12. Concluding comments
      13. Further reading
    4. 14 Analysing industries
      1. The competitive floor
      2. The five competitive forces
      3. Threat of entry
      4. Intensity of rivalry of existing companies
      5. The threat from substitutes
      6. Buyer (customer) power
      7. Supplier power
      8. Industry evolution
      9. Concluding comments
      10. Further reading
    5. 15 The competitive position of the firm
      1. The TRRACK system
      2. What makes resources extraordinary?
      3. Investment in resources
      4. Leveraging resources and over-exploiting them
      5. Concluding comments
      6. Further reading
  13. part 4 Managing your portfolio
    1. 16 Companies issuing shares
      1. New issues
      2. Rights issues
      3. Other equity issues
      4. Scrip issues
      5. Share buy-backs and special dividends
    2. 17 Taxation and investors
      1. Stamp duty
      2. Tax on dividends
      3. Capital gains tax
      4. Interest-bearing instruments
      5. Inheritance tax
      6. Individual savings accounts
      7. Personal pensions
      8. Enterprise Investment Scheme
      9. Venture capital trusts
      10. Tax-efficient charitable gifts
    3. 18 Mergers and takeovers
      1. Merger motives
      2. Financing mergers
      3. The rules of the takeover game
      4. Who wins from mergers?
      5. Final comment: why do mergers fail?
      6. Further reading
    4. 19 Investor protection
      1. Protecting investors from wayward financial services professionals
      2. Regulation of markets
      3. Regulation of companies
      4. Self-protection
      5. Scams
    5. 20 Measuring performance: indices and risk
      1. Indices
      2. Risk
      3. Websites
      4. Further reading
    6. 21 Investment clubs
      1. How to set up a club
      2. The unit valuation system
      3. Bank account
      4. Brokers
      5. Tax
      6. Further reading
      7. What did you think of this book?
  14. Glossary
  15. Index
  16. Imprint