New York Institute of Finance - Guide to Investing

In today?s hot market, people from all walks of life are investing in the stock market, many for the first time. It?s never been easier to invest?but it?s as risky as ever. It doesn?t have to be when you follow the proven advice of veteran investment broker Michael Steinberg. His updated and revised book contains all the essentials for smart investing?written in plain English?including key trends and an in-depth look at online trading. He?ll walk you through how to develop your net worth and cash flow statements and help you make investment decisions that suit your goals and lifestyle. This rock-solid guidebook covers the basic concepts of investing, including types of investments; fundamental and technical investing; terminology, proven strategies, and potential pitfalls; and available resources. You?ll get expert guidance into reading stock and mutual fund tables, selecting the mutual fund that?s right for you, choosing a brokerage firm, protecting yourself against fraud, trading on the internet, and much more. Whether you?re a novice investor or an experienced professional, the NYIF Guide to Investing is your road map to growing your investment portfolio.

Contents

Introduction xiii

Chapter 1 - Determining Your Investment Goals 1

• Investment Preparation 1
• First Things First 5
• Your Financial Profile 7
• Your Psychological Profile 8
• Understanding Investment Risk 11
• Budgeting 12
• Tax Planning 14

Chapter 2 - What Is a Stock? 18

• Types of Business Organizations 19
• Capitalization of Corporations 21
• The Process of Going Public 23
• How Do You Go about Investing? 26
• Reading Stock Tables in the Financial News 31

Chapter 3 - There's More Than One Way to Invest 38

• Corporate Bonds 38
• Reading Corporate Bond Tables in the Financial News 46
• U.S. Government-Issued Securities 49
• Municipal Bonds 51
• U.S. Government-Sponsored Securities 53
• Mortgage-Backed Securities 55
• Options and Other Derivatives 58
• Commodities/Futures 60
• Savings Accounts 62
• Insurance 63
• Real Estate 63
• Collectibles 64
• Precious Metals 65

Chapter 4 - Mutual Funds 67

• Selecting a Mutual Fund 67
• Which Funds Are Best for You 74
• Reading Mutual Fund Tables 74
• Pros and Cons 80
• Index Funds 81

Chapter 5 - There's More Than One Market 84

• Wall Street-Where it All Began 84
• The New York Stock Exchange 85
• The American Stock Exchange 90
• Regional Stock Exchanges 91
• The Over-the-Counter Market 91
• The Chicago Board Options Exchange 94
• Futures Exchanges 95

Chapter 6 - Implementing Your Investment Goals 98

• Investment Objectives 99
• The Risk/Reward Ratio 101
• Leverage 102
• Market Averages 108
• What Causes Market Movements? 110
• Choosing Your Investments 112

Chapter 7 - The Brokerage Firm and You 117

• What the Brokerage Firm Does for the Investor 117
• What the Stockbroker Does for You 120
• Full-Service and Discount Firms 122
• Your Relationship with Your Account Executive 128

Chapter 8 - Opening an Account 134

• Choosing a Brokerage Firm 134
• Choosing an Account Executive 136
• Types of Accounts 139

Chapter 9 - The Mechanics of Trading 153

• How an Order Is Executed 153
• Units of Trading 155
• Types of Orders 155
• Special Instructions 156
• Selling Short 156
• Dividends 157
• Accrued Interest 159
• Your Monthly Statement 159

Chapter 10 - Fundamental Analysis 162

• Defining a "Sound Investment" 162
• Fundamental vs. Technical Analysis 164
• The Basics 165
• Value vs. Growth 180
• Ownership: The Missing Link 183
• Conclusion 190

Chapter 11 - Technical Analysis 192

• Basic Concepts of Technical Trading 192
• Bar Charts 194
• Trade and Trend Lines 194
• Channel Lines 198
• Retracement 200
• Price Gaps 201
• Island Reversal 203
• Resistance and Support 203
• Price Patterns 205
• Blowoffs and Selling Climaxes 210
• Moving Averages 211
• Oscillators 211
• Point-and-Figure Charts 213
• Box Size 213
• The Horizontal Count 217
• Point-and-Figure Price Patterns 217
• Using Long-Term Charts 217
• Confirmation and Divergence 217
• Sentiment Indicators 219
• Conclusion 221

Chapter 12 - Your Rights As an Investor 223

• Shareholder Rights 224
• Protecting Yourself Against Fraud 229
• Preventing and Correcting Errors 232
• Where to Turn for Help 235
• How to Recover Your Money 236
• Final Comments 240

Chapter 13 - Computers and the Internet 241

• Computer Efficiency 242
• The Internet as an Investment Tool 243
• Trading on the Internet 244
• Internet Stocks as Investments 245
• Day Trading 248

Glossary 251

Appendix 1 - Recommended Reading 277

Appendix 2 - Sources for Additional Information on Brokerage Firms 279

Appendix 3 - Recommended Websites 283

Index 289