Ken Little - Teach Yourself Investing in 24 Easy Lessons

A member of Penguin Group (USA) Inc.

This book is dedicated to my wife, Cyndy, who has never stopped believing in me, even when I have trouble believing in myself.

ALPHA BOOKS

Published by Penguin Group (USA) Inc.

Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, USA Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario M4P 2Y3, Canada (a division of Pearson Penguin Canada Inc.) Penguin Books Ltd., 80 Strand, London WC2R 0RL, England Penguin Ireland, 25 St. Stephens Green, Dublin 2, Ireland (a division of Penguin Books Ltd.) Penguin Group (Australia), 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty. Ltd.) Penguin Books India Pvt. Ltd., 11 Community Centre, Panchsheel Park, New Delhi110 017, India Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore, Auckland 1311, New Zealand (a division of Pearson New Zealand Ltd.) Penguin Books (South Africa) (Pty.) Ltd., 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa Penguin Books Ltd., Registered Offices: 80 Strand, London WC2R 0RL, England

Copyright 2012 by Ken Little

All rights reserved. No part of this book may be reproduced, scanned, or distributed in any printed or electronic form without permission. Please do not participate in or encourage piracy of copyrighted materials in violation of the authors rights. Purchase only authorized editions. No patent liability is assumed with respect to the use of the information contained herein. Although every precaution has been taken in the preparation of this book, the publisher and author assume no responsibility for errors or omissions. Neither is any liability assumed for damages resulting from the use of information contained herein. For information, address Alpha Books, 800 East 96th Street, Indianapolis, IN 46240.

ISBN: 978-1-101-58581-8

Library of Congress Catalog Card Number: 2011945187

14 13 12 8 7 6 5 4 3 2 1

Interpretation of the printing code: The rightmost number of the first series of numbers is the year of the books printing; the rightmost number of the second series of numbers is the number of the books printing. For example, a printing code of 12-1 shows that the first printing occurred in 2012.

Printed in the United States of America

Note: This publication contains the opinions and ideas of its author. It is intended to provide helpful and informative material on the subject matter covered. It is sold with the understanding that the author and publisher are not engaged in rendering professional services in the book. If the reader requires personal assistance or advice, a competent professional should be consulted.

The author and publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book.

Trademarks: All terms mentioned in this book that are known to be or are suspected of being trademarks or service marks have been appropriately capitalized. Alpha Books and Penguin Group (USA) Inc. cannot attest to the accuracy of this information. Use of a term in this book should not be regarded as affecting the validity of any trademark or service mark.

Most Alpha books are available at special quantity discounts for bulk purchases for sales promotions, premiums, fund-raising, or educational use. Special books, or book excerpts, can also be created to fit specific needs. For details, write: Special Markets, Alpha Books, 375 Hudson Street, New York, NY 10014.

Publisher: Marie Butler-Knight

Associate Publisher: Mike Sanders

Executive Managing Editor: Billy Fields

Senior Acquisitions Editor: Brook Farling

Development Editor: Lynn Northrup

Senior Production Editor: Kayla Dugger

Copy Editor: Monica Stone

Cover/Book Designer: William Thomas

Indexer: Celia McCoy

Layout: Ayanna Lacey

Proofreader: John Etchison

ALWAYS LEARNING

PEARSON

If your image of investing is a bunch of men in pinstriped suits smoking cigars and discussing index funds, have I got a surprise for you! Men and women of all ages and backgrounds are todays investors.

The good news is that todays markets and products will accommodate just about any investment stylefrom the very passive investor who wants as much of his strategy as possible on automatic pilot, to the active investor who pores over all the news and research she can, genuinely enjoying a hands-on approach.

This book is addressed to those two and everyone in between. It is important for passive investors to understand what is happening even if they have turned mostor allof their investments over to a mutual fund manager. The more active investors will appreciate the nuts-and-bolts approach that gives them foundational information and encourages continued study and research.

This book will give beginning investors a solid foundation. It will also serve as a springboard to other study and research for those wanting a more detailed look at some of the concepts.

I know you dont have a lot of extra time. Youre a hard-working individual whose life is probably spent taking care of others, whether its your boss or your family, and you want to do something for yourself. Ive created this book for you, to make investing fun and profitable.

I wont close this introduction with a polite good luck, because you will not need luck to be a successful investor after absorbing the concepts in this book.

There are 24 lessons in this book, divided into five parts. It begins with the basics, including investing terminology and instruments, and builds on this foundation. Every lesson adds to the previous ones, either introducing new concepts or expanding on previously covered topics. Each lesson is designed to be a self-contained unit that builds on previous material. At the end of each lesson is a short exercise that asks you to reflect on what you have just readits an open-book exercise, so dont worry about passing or failing.

Heres how the book is organized:

, Getting Started, lays the groundwork for your investing program. Sometimes the first step is the most difficult, and this part focuses on the basics so you can move forward. We will also go over some basic investment terms and instruments so that everybody is on the same page.

, Digging Deeper into the Art of Investing, gives you an overview of the math (dont worry, its not hard) and the research you will need. Key numbers are explained to help you begin analyzing investments. Research and news reports will keep you on top of important investing facts and trends. Finally, we will go over the different types of brokers and look at their strengths and weaknesses.

, The Major Investment Vehicles,