Steven Casey - Stock Market Investing For Beginners - Fundamentals On How To Successfully Invest In Stocks

STOCK MARKET INVESTING FOR BEGINNERS

Fundamentals On How To Successfully Invest In Stocks

By

Steven Casey

Introduction

Y ou should feel richer than you do. You manage to save some money every month; you put it in the bank, and gradually, it grows. But it never seems to grow very much - the bank is paying you hardly any interest, and after a few years of saving, you still don't feel you're getting anywhere. Does that sound familiar to you? It's a problem for many people - however hard they work, however hard they save, they never seem to get any wealthier.

We're going to show you how to change things for the better. If you stop putting your money in the bank, and instead, use the stock market to invest your money in productive assets, you'll be taking on a little bit more risk but with the prospect of a greatly increased return. This book will show you how to become an educated stock market investor, able to select the best investments for increasing your wealth over the medium and long term.

I have years of experience of the stock market, both as a professional advisor and running my own personal stock portfolio. I've run my slide rule across all kinds of investments, from start-up technology companies to old-style family breweries, across Europe and in the US. Now I'll show you how to get started by making one of the best investments available to anyone - an investment in your own education.

In this book, you'll learn how the stock market works, and how to assess investment opportunities so that you can pick the good ones and pass up the dross. You'll also learn about the advantages and disadvantages of different types of collective investment, such as Exchange Traded Funds and managed funds, as well as direct investment in shares. Unlike many books on investing, this one won't push a particular method - we'll talk about a number of different styles of investing, all of which can be used with success. The important thing is finding an investment style that suits your personality and your investment objectives. In short, if you read this book and apply the lessons you've learned, you'll be well on the way to improving your investment returns and ensuring your financial security.

Back in the 1990s two young stockbrokers had fairly small bonuses to invest. One bought a red Ferrari and put a down payment on a large house in a chic neighborhood. The other put most of the money into funds in emerging markets - at the time considered quite an aggressive move. The first analyst is still paying down debt. The second became financially independent in her forties, and was able to take two years as a sabbatical to travel around the world. Which would you rather be - the guy with the Ferrari, or footloose and fancy free?

You might not have much of a bonus to invest. But investing regular small amounts can make a huge difference to your financial prospects. One young graduate decided as soon as he got a job to start saving five percent of his monthly income, and put it into shares he'd picked for their long term growth prospects. When he received dividends, he invested them instead of spending the cash. Ten years later, he was looking at more than double what he'd started with.

This book can change your life. Instead of putting your money in the bank and getting a slow drip of derisory interest on your cash, you can invest in high quality shares and receive both dividend income and price appreciation. You might be putting money aside for any number of reasons - to fund retirement, or a sabbatical, or to create investment income that can help support a better lifestyle for you and your family.

But you should get started right now. "Time is money" - quite literally, because of the power of compounding. If you make an extra four percent return this year (and that's quite low - historically, equity returns have usually been around 7-8%), next year you'll earn money on your original investment, and on that extra four percent too. Over ten years, that's an extra 48 percent. But of course, the longer you wait, the less of that extra return you'll make - that's why it's important to start as soon as you're able to.

Make your first step towards a wealthier and more secure future by buying this book, and learning how to invest wisely.

Chapter 1: The basics of stock market investment

Y ou're probably keen to start learning how to value investments and build your portfolio. But before we start, we need to make sure you understand the basics of stock market investment; what you're actually buying, and how markets work. Of course, you might know this already - but it may still be worth a quick refresher course before we wade into the efficient market theory, methods of analyzing returns on capital, and momentum investing.

Let's start by looking at what you're actually buying when you buy shares.

1.1 Corporate structure and equity issues

A lthough an individual person can run a business, or any number of people can join a partnership, most large businesses are run as limited companies. A company acts as a single entity (a single 'legal person'), but its capital is divided into a number of shares, which can be held by individuals or companies, or by institutional investors such as mutual funds or pension funds.

When you buy a share, you're buying a small proportion of the company's assets and earnings. But you're not actually buying the assets - the company owns its office, and the tables and chairs; you own a proportion of the company, not one chair or half a table. You're also buying a vote on major decisions, such as whether to accept a takeover bid, or to change auditors, though you're not involved in the actual management of the company. (Some major shareholders are able to exert significant influence over company strategy, and of course, some directors and managers of companies are also significant shareholders - but the roles of shareholders and directors are legally distinct.

You're also buying a share in a limited liability company. That means you can only lose your original investment - no one can come after you for more. If a company loses a massive lawsuit, the worst that can happen is that it goes bust, and your shares are worth nothing; no one has a claim on your house or bank balance.