Investing All-in-One For Dummies. Eric Tyson
debt-free, and you’d like to start a portfolio.
You may have some investments, but you’re looking to develop a full-scale investment plan.
You’re tired of feeling overwhelmed by your investing choices and stressed out by the ever-changing economic and investing landscape, and you want to get more comfortable with your investment selections.
You want to evaluate your investment advisor’s advice.
You have a company-sponsored investment plan, like a 401(k), and you’re looking to make some decisions or roll it over into a new plan.
If one or more of these descriptions sound familiar, you’ve come to the right place.
Icons Used in This Book
Throughout this book, icons help guide you through the maze of suggestions, solutions, and cautions. We hope the following images make your journey through investment strategies smoother.
Beyond the Book
In addition to the material in the print or e-book you’re reading right now, this product comes with a free access-anywhere Cheat Sheet that can set you on the path to successful investing. To get this Cheat Sheet, simply go to www.dummies.com and enter “Investing All-in-One For Dummies Cheat Sheet” in the Search box.
Where to Go from Here
If you’re a new investor, you may want to consider starting from the beginning. That way, you’ll be ready for some of the more advanced topics introduced later in the book. But you don’t have to read this book from cover to cover. If you have a specific question or two that you want to focus on today, or if you want to find some additional information tomorrow, that’s not a problem. Investing All-in-One For Dummies makes it easy to find answers to specific questions. Just turn to the table of contents or index to locate the information you need. You can get in and get out, just like that.
Book 1
Getting Started with Investing
Contents at a Glance
1 Chapter 1: Exploring Your Investment Choices Getting Started with Investing Building Wealth with Ownership Investments Generating Income from Lending Investments Considering Cash Equivalents Choosing Where to Invest and Get Advice
2 Chapter 2: Weighing Risks and Returns Evaluating Risks Analyzing Returns Compounding Your Returns
3 Chapter 3: The Workings of Stock and Bond Markets How Companies Raise Money through the Financial Markets Understanding Financial Markets and Economics
Chapter 1
Exploring Your Investment Choices
IN THIS CHAPTER
In many parts of the world, life’s basic necessities — food, clothing, shelter, healthcare, and taxes — consume the entirety of people’s meager earnings. Although some Americans do truly struggle for basic necessities, the bigger problem for other Americans is that they consider just about everything — eating out, driving new cars, hopping on airplanes for vacation — to be a necessity.
This book is here to help you recognize that investing — that is, putting your money to work for you — is a necessity. If you want to accomplish important personal and financial goals, such as owning a home, starting your own business, helping your kids through college (and spending more time with them when they’re young), retiring comfortably, and so on, you must know how to invest well.
It’s been said, and too often quoted, that the only certainties in life are death and taxes. You can add one more to these two certainties: being confused by and ignorant about investing. Because investing is a confounding activity, you may be tempted to look with envious eyes at those people in the world who appear to be savvy with money and investing. Keep in mind that everyone starts with the same level of financial knowledge: none! No one was born knowing this stuff! The only difference between those who know and those who don’t is that those who know have either devoted their time and energy to acquiring useful knowledge about the investment world or have had their parents instill a good base of investing knowledge.
Getting Started with Investing
Before the rest of this chapter discusses the major investing alternatives, this section starts with something that’s quite basic yet important. What exactly does “investing” mean? Simply stated, investing means you have money put away for future use.
You can choose from tens of thousands of stocks, bonds, mutual funds, exchange-traded funds, and other investments. Unfortunately for the novice,