Michael Sincere - Understanding Stocks 2E

Copyright 2014 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

ISBN 978-0-07-183033-1

MHID 0-07-183033-2

The material in this eBook also appears in the print version of this title: e-ISBN 978-0-07-183034-8, e-MHID 0-07-183034-0

All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps.

McGraw-Hill Education books are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. To contact a special sales representative, please visit the Contact Us page at www.mhprofessional.com.

TERMS OF USE

This is a copyrighted work and The McGraw-Hill Companies, Inc. (McGraw-Hill) and its licensors reserve all rights in and to the work. Use of this work is subject to these terms. Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hills prior consent. You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited. Your right to use the work may be terminated if you fail to comply with these terms.

THE WORK IS PROVIDED AS IS. McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any information accessed through the work. Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise.

To my mother, Lois, whom I will always remember for her
compassion and generosity, and who asked for so little while accomplishing so much; and to my father,
Charles, for his kindness and positive attitude.

To Anna Ridolfo, a close friend and loyal New Yorker,
who devoted her life to helping others.

Contents

WHAT YOU NEED TO KNOW FIRST

HOW TO ENTER, EXIT, AND ESCAPE STOCKS

MONEY-MAKING STRATEGIES

DECIDE WHICH STOCKS TO BUY OR SELL

OUTSIDE THE BOX

SINCERE ADVICE

The Opening

A Much Improved Stock Book

Because of the success of the first edition of Understanding Stocks , my editor at McGraw-Hill asked me to write a second edition. I want to thank the thousands of readers who bought my first book and wrote to me with suggestions. Because of their ideas, this second edition is even better.

In this edition, I spent more time on how to make money using investing and trading strategies; how to find stocks to buy and sell; how to use market indicators to predict what the market might do; how to invest in alternative investments such as currencies, gold, bonds, and real estate; how to use exchange-traded funds (ETFs) and mutual funds to invest in the market; how to sell short; and how to use options to protect your stock portfolio.

In addition, I streamlined the sections on strategies and tools. Instead of simply listing every strategy and tool that is available to investors and traders, I introduced the most important ones. This will save you time.

I also created new chapters on how to minimize risk and avoid making mistakes. Finally, I included interviews with legendary investors William ONeil and John Bogle.

My goal for this book is simple: I want to teach you what you need to know about the stock market so that you can make money when the market is going up and limit losses when the market is going down. There are no guarantees youll make a profit, but at least youll learn the tools and strategies before you invest real money into the market.

Who Should Read This Book?

If you are thinking of investing in the stock market or are already investing but losing money, this could be the most useful book you ever read. I grew up with the stock market, took the classes, read the books, talked to hundreds of pros, and invested and traded stocks. I also made every conceivable mistake, which I will help you to avoid. You could save thousands of dollars by learning from my errors.

As in my other books, I explain stocks as if you were sitting across from me at the kitchen table. My goal is to save you time and money while educating and entertaining you. In fact, if you are reading this book not to make money but for education or entertainment, my book should meet your needs.

This book will be different. It is designed to help you quickly learn how to invest in or trade stocks. Thousands of books have already been written about the stock market, many of them technical and tedious. I was amazed that so many boring books had been written about such a fascinating subject. Just like you, I hate reading books that put me to sleep by the second chapter. This is why I was so determined to write an easy-to-read and educational book about the market.

I wanted to write a book that I can hand to you and say, Read everything in this book if you want to learn quickly about stocks. You dont have to be a dummy, idiot, or fool to understand the market. You also dont have to be a genius. After you read this book, you will realize that understanding stocks is not that hard. (The hard part is making money, but we get to that later.)

I also dont think you should have to wade through 300 pages to learn about the market. Too many books on stocks are as thick as college textbooks and not nearly as exciting. Even though this book is relatively short, it is packed with information about investing and trading.

No matter what your age or income, learning about the stock market is essential to your financial health. Even if someone else is managing your account, its important you know how the market works.

The stock market is also the best place to make money. Fortunately, you dont have to have a fortune to make a fortune. On occasion, you might hit a home run and make a lot of money fast. For now, however, you have one goal: learn about the market. My goal is to teach you how to invest for a lifetime, not just for a few days.