Adidas Wilson - Investing Made Simple--Warren Buffet Strategies to Building Wealth and Creating Passive Income

Copyright 2018 by Adidas Wilson

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Adidas Wilson

P.O. Box 2262

Antioch, Tn. 37011

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www.adidaswilson.com

Disclaimer

T HE AUTHOR HAS MADE every effort to ensure the accuracy of the information within this book was correct at time of publication. The author does not assume and hereby disclaims any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from accident, negligence, or any other cause.

Table of Contents

I ntroduction Stocks for Beginner Investors

Ch. 1 What is an Index Fund

Ch. 2 How to Invest in Index Funds

Ch. 3 - Warren Buffett's Investing Style Reviewed

Ch. 4 - Dividend Investing for Beginners

Ch. 5 - Stock Market Basics

Ch. 6 - Different Types of Stocks

Ch. 7 ETFs

Ch. 8 - How to Invest in Stocks

Ch. 9 - How Stocks Trade

Ch. 10 - How Warren Buffett Started

Ch. 11 - How to Invest Like Warren Buffett

Ch. 12 - Investing Mistakes to Avoid at All Cost

Conclusion

Introduction

Stocks for Beginner Investors

T here are a few great ways to invest your money. However, if you want the best returns, the stock market is a good option. If you do not already have stocks you are missing out on something big. For a beginner, buying stocks can be overwhelming and this book is meant to help you through the process. When you buy a stock, what you are basically doing is buying a part ownership of the company. You buy the stocks in individual shares. If you buy more shares, you get a greater stake in the company. Another thing, purchasing stocks can give you shareholder rights such as the right to vote and receive dividends. What is the importance of voting rights? The matter that shareholders vote on affect the value of the shares. Companies that are considered public are those that issue stocks because they give the public an opportunity to invest in them. Private companies, on the other hand, do not issue stocks on the public exchange. A company issues stocks to acquire capital. Once it issues stocks it becomes accountable to its shareholders and has to adhere to strict disclosures and regulations. Stocks can earn you money in two ways. The first way is to buy stocks and resell them at a higher price. The number of shares you should buy depends on the amount of money you want to invest and the price of shares. The second way is to keep the shares and earn dividends. A dividend is a fraction of the companys earnings paid to shareholders. Stocks are traded on a public exchange. You can always get updated information on share prices of various companies. So how do you get those shares? You require a broker. This can be an online brokerage firm or an actual person. Investors nowadays prefer the latter. Stocks are issued in two forms: preferred stock and common stock. Common stock gives you ownership share in the company and it gives you voting rights. Preferred stock also gives you ownership share, but it gives you an entitlement to a predetermined dividend. Next, you need to decide the specific companies in which you want to invest. A lot of research is needed here. As a beginner, look for businesses that you understand. Those whose models you know well. If you are a tech person, it would be wise to invest in tech companies. Also, identify companies that have a solid competitive advantage and good management teams. Before you invest in a company, evaluate it by looking at the following:

Balance sheet

Cash flow statement

Income statement

Earnings per share

Price to earnings ratio/market capitalization

Return on equity

Why Choose Stocks?

Investing in bonds is safer than investing in stocks; so why take the risk? The stock market delivers much higher returns over time. Investing in stocks will see you grow your wealth efficiently and faster over time. The stock market is very volatile. However, as long as you are patient and have a long-term mindset, you will be fine.

Smart Way to Invest in Stocks

Have a long-term mindset

Do not lose heart when the stock market falls

Diversify

Avoid penny stocks

Chapter 1

What is An Index Fund?

A n index fund can be described as a kind of mutual fund with holdings that track or match a certain market index. You can have a diversified portfolio and earn significant returns with this kind of investment. The reason is that, index funds are not in competition with the market; they are, instead, trying to be the market. That is, buying stocks of all the listed firms on the index and therefore reflecting the indexs performance. Index funds are helpful in balancing the risk in the portfolio of an investor. Market swings are usually less volatile throughout the index unlike with individual stocks. They allow you to buy the entire market indirectly. With an index fund, you buy the securities making up the entire index. An index fund usually buys shares from all companies that are listed on an index. An investor then buys shares from that fund and its value will reflect the losses and gains of the index that is being tracked. You win by accepting defeat. There is a high likelihood that you will not outperform the market when you pick individual stocks. Even experienced investors do not. According to research (2001 to 2016), over 90 percent of active fund managers actually underperformed their benchmark index. You have a better chance of meeting market gains than you have of beating the market. That is the major purpose of index funds. Index funds are becoming more popular among investors. Actively managed exchange-traded funds and mutual funds saw outflows of almost $514 billion. Passively managed funds, on the other hand, saw about $1.6 trillion in new money (April 2014 to April 2017). The increased popularity of passive investing and robo-advisors are responsible for this. There are index funds across different asset classes. An investor can acquire funds that focus on a specific sector such as technology or on companies with large, medium, or small capital values. These indexes may not be as diversified as the broadest index market, but they are still diversified. What is in It for You? Although individual stocks rise and fall, indexes rise with time. You may not get an insane profit during a bear market with index funds, but you will also not lose your money in one investment. With index funds, there are fewer fees that reduce your returns. For index funds the expense ratios (cost of management and commissions of your account) are lower. This is because they are easier to run than the managed accounts. You will not be paying someone to assess financial statements. You diversify your portfolio with index funds. Index funds, just like other mutual funds, spread risk and offer investors more choice among riskier and conservative investments and also a wider mix of asset classes and industries. It is easy to understand index funds. It may be a little difficult to understand most investing strategies. However, what you see with index funds is exactly what you get.