Index
Numbers
10-K report, 36
10-Q report, 37
401(k) retirement accounts, 127
A
accounts, brokerage
cash, 117
discount, 116
discretionary, 118
full-service, 115-116
margin, 117-118
online, 116
opening, 115
accounts receivable, 38
aggressive portfolios, 101-103
allocation of assets, 94-95
analysis
businesses, 70
economic moats, 65-70
ratios, 70
earnings per share (EPS), 71
price earnings ratio (P/E), 71-73
annual report, 36
Apple, 128
assets, 38-39, 95
accounts receivable, 38
allocation, 94-95
timing, 98
cash, 96
current, 38
fixed-income securities, 96-99
noncurrent, 39
return on assets (ROA), 66
stocks, 99-100
B
balance sheets, 37
assets, 38-39
liabilities, 39-40
shareholders equity, 40-41
balanced investing, 16-17
basic materials sector, stocks, 59
bonds
corporate, 97
fixed-income securities, 96-99
municipal, 97
cash, 117
discount, 116
discretionary, 118
full-service, 115-116
margin, 117-118
online, 116
opening, 115
brokers, 107-108
choosing, 114-115
discount, 110-113
full-service, 108-110
online, 108-114
placing orders, 121
reporting, 123-124
budgets, reviewing, 127
building assets, 95-96
building portfolios, 93,
100-101, 106
aggressive, 101-103
asset allocation, 94-95, 98
conservative, 105-106
diversification, 100
fixed-income securities, 96-99
moderate, 103-105
stocks, 99-100
businesses, analyzing, 70
buyer’s remorse, 89
buyers, following, 81-82
C
calls, naked, 14
capital gains
long-term, 92
short-term, 92
taxes, 91
capital goods sector, stocks, 59
cash, 96
cash brokerage accounts, 117
cash flows
discounted
alternatives, 77-78
intrinsic value, 73-75
strength, 76
weakness, 75
financing activities, 46
free, 66
operating activities, 45
COGS (cost of goods sold), 42
communications sector, stocks, 59
companies
competitive advantages, 65
economic moats
analyzing, 65-70
hybrid, 107
profitability, 66-67
company reports, 36-37
competitive advantages, 65
compounding, 127
conservative portfolios,
105-106
consumer cyclical sector, stocks, 59
core holdings, 102-106
core stocks, 15-16, 54-56
purchasing, 86-87
corporate bonds, 97
cost of goods sold (COGS), 42
costs, trading, 133
current assets, 38
cyclical sectors, stocks, 59-60
day-trading, 81-82
defensive sectors, stocks, 58
deferring taxes, 90-91
discount brokerage accounts, 116
discount stockbrokers, 110-113
discounted cash flows
alternatives, 77-78
intrinsic value, 73-75
strength, 76
weakness, 75
discretionary brokerage accounts, 118
diversification, 133
portfolios, 100
dividends, 46
taxes, 92
yield, 78
dot.com boom, 81, 132
Dow, the, 81
E
earnings growth, 66
earnings per share (EPS), 43, 71
economic moats, 65
analyzing, 65-70
economic risks, 21
energy sector, stocks, 59
Enron, 128
EPS (earnings per share), 43, 71
equity, return on equity (ROE), 67
expenses, 42-43
F
Financial Industry Regulatory Authority (FINRA), 124
financial information, 25-26, 31
bad, 30
Forbes.com, 29
Morningstar, 26-27
MSN Money, 29
Stocks About.com, 30
The Street, 29
Yahoo! Finance, 27-29
financial sector, stocks, 59
financial statements, 35-37
balance sheets, 37
assets, 38-39
liabilities, 39-40
shareholders equity, 40-41
company reports, 36-37
income, 41-42
expenses, 42-43
net, 43-44
operating, 43
revenue, 42
statement of cash flows, 44-46
FINRA (Financial Industry Regulatory Authority), 124
fiscal year, 36
fixed-income securities, 96-99
Forbes.com, 29
foreign stocks, 102-104
fraud, 129
free cash flow, 66
full-service brokerage accounts, 115-116
full-service stockbrokers,
108-110
G
geopolitical risk, 22
get-rich-quick schemes,
avoiding, 13
goals
investment, 11-13
reasonable expectations, 20-21
growth
earnings, 66
investing, 15
growth stocks, 15-16, 47-51
large, 104
purchasing, 87
volatility, 49
H
health care sector, stocks, 59
hot market, 51
hot tips, 133
hybrid companies, 107
I–J–K
income statements, 41-42
expenses, 42-43
net income, 43-44
operating income, 43
revenue, 42
statement of cash flows, 44-46
inflation risk, 21
internet financial information
Forbes.com, 29
Morningstar, 26-27
MSN Money, 29
Stocks About.com, 30
The Street, 29
Yahoo! Finance, 27-29
intrinsic value
discounted cash flow, 73-75
stocks, 64-65
investing
avoiding mistakes, 126-134
keeping expenses low,
122-123
long-term, 9-10
taxes, 90-92
investment plans, 6
abandoning, 130-132
goals, 11-13
investment strategies, 14-15
balanced, 16-17
growth, 15
safety, 15-16
large-cap stocks, 57
large-growth stocks, 104
liabilities, 39-40
limit orders, 119-120
liquidity, 5
long-term capital gains, 92
long-term growth, 4-5
long-term investing, 9-10
M
margin brokerage accounts, 117-118
market orders, 118-119
market timing, 129-130
market value risk, 22
markets, 51
pricing stocks, 2
mega-cap stocks, 57
metrics, stocks, 56-57
mid-cap growth stocks, 57, 102
mid-cap value stocks, 104
mistakes, avoiding, 126-134
moderate portfolios, 103-105
Morningstar, 26-27
stock screen, 33-34
MSN Money, 29
municipal bonds, 97
N
naked calls, 14
narrow sector factors, 23
Nasdaq Composite, 81
net income, 43-44
net margins, 67
new economy, 132
newsletters, 122
noncurrent assets, 39
nonsystematic risks, 22-23
O
online brokerage accounts, 116
online stockbrokers, 108,
113-114
opening brokerage accounts, 115
operating activities, cash flows, 45
operating income, 43
orders, 118
limit, 119-120
market, 119
placing with brokers, 121
stop-loss, 120
trailing stops, 120-121
ownership rights, stocks, 3-4
PEG (price to earning growth) ratio, 52
penny stocks, 30
P/E (price earnings ratio), 52, 71-73
planning, selling stocks, 88-89
poor management decisions, 22
portfolios
aggressive, 101-103
building, 93-95, 100-101, 106
asset allocation, 94-95, 98
cash, 96
diversification, 100
fixed-income securities, 96-99
stocks, 99-100
conservative, 105-106
diversification, 133
moderate, 103-105
rebalancing, 89
preferred stocks, 3-4
price, stocks, 62-63
price earnings ratio (P/E), 52, 71-73
price targets, 28
price to earning growth ratio (PEG), 52
Price/Book ratio, 78
Price/Cash Flow ratio, 78
Price/Sales ratio, 78
prices, stocks, company
value, 7
professional traders, 24
profitability, companies, 66-67
publications, 122
purchasing stocks, 5-9, 79-81
following buyers, 81-82
following sellers, 82-83
planning, 83-86
timing, 86-87
R
ratios, 70
Dividend Yield, 78
earnings per share (EPS), 71
price earnings ratio (P/E), 71-73
Price/Book, 78
Price/Cash Flow, 78
Price/Sales, 78
retirement plans, 127
return on assets (ROA), 66
return on equity (ROE), 67
revenue, 42
reward, maximizing, 19-20
risk, 17-21
measuring against reward, 18-19
minimizing, 19-24
nonsystematic, 22-23
systematic, 21-22
tolerance, 88
ROA (return on assets), 66
ROE (return on equity), 67
S&P 500 Index, 81
safe investing, 15-16
sales, 42
SEC (Securities and Exchange Commission), 36, 123
sectors
cyclical, 59-60
defensive, 58
stocks, 57-60
securities, fixed-income, 96-99
Securities and Exchange Commission (SEC), 36, 123
sellers, following, 82-83
selling stocks, 5, 79-81
following buyers, 81-82
following sellers, 82-83
planning, 83-89
shareholders equity, 40-41
short-term capital gains, 92
sizes, stocks, 56-57
small-cap tech/growth stocks, 57, 102
speculation, 133
state laws, brokerage firms, 124
statement of cash flows, 44-46
statement of financial position, 37
assets, 38-39
liabilities, 39-40
shareholders equity, 40-41
statements (financial), 35-37
balance sheets, 37-41
company reports, 36-37
income, 41-44
of cash flows, 44-46
of financial position, 37-41
stock market orders, 118
limit, 119-120
market, 119
placing with brokers, 121
stop-loss, 120
trailing stops, 120-121
stock screens, 31-34
stockbrokers, 107-108
choosing, 114-115
discount, 110-113
full-service, 108-110
online, 108, 113-114
placing orders, 121
reporting, 123-124
stockholders equity, 40-41
stocks, 2, 47, 61, 99-100
core, 15-16, 54-56
diversification, 100
foreign, 102-104
growth, 15-16, 47-51
volatility, 49
large-cap, 57
liquidity, 5
long-term growth, 4-5
mega-cap, 57
metrics, 56-57
mid-cap, 57
mid-cap growth, 102
mid-cap value, 104
overvalued, 89
penny, 30
prices, 62
company value, 7
process, 63
versus value, 63
purchasing, 5-9, 79-81
following buyers, 81-82
following sellers, 82-83
planning, 83-86
timing, 86-87
rights of ownership, 3-4
sectors, 57-60
cyclical, 59-60
defensive, 58
selling, 5, 79-81
following buyers, 81-82
following sellers, 82-83
planning, 83-89
sizes, 56-57
small-cap, 57
taxes, 91-92
technology, 59, 103
value, 16, 51-54, 105
intrinsic, 64-65
when to avoid, 13
Stocks About.com, 30
stop-loss orders, 120
strategies, investment, 14-17
Street, The, 29
strengths, discounted cash flows, 76
systematic risks, 21-22
T
taxes
deferring, 90-91
dividends, 92
stocks, 91-92
technology stocks, 59, 103
timing
asset allocation, 98
purchasing stocks, 86-87
tolerance, risk, 88
trading costs, 133
trailing stops, 120-121
transportation sector stocks, 60
Treasuries, 97
U–V
unsolicited advice, 30
U.S. Treasury, 97
value
intrinsic, discounted cash flow, 73-75
stocks
intrinsic, 64-65
versus price, 63
value stocks, 16, 51-54, 105
purchasing, 87
volatility, growth stocks, 49
weaknesses, discounted cash flows, 75
web economy, 132
websites
Forbes.com, 29
Morningstar, 26-27
MSN Money, 29
stock screens, 31-34
Stocks About.com, 30
The Street, 29
Yahoo! Finance, 27-29
Yahoo! Finance, 27-29