Reading the Financial Pages for Dummies®

Reading the Financial Pages for Dummies®

by Michael Wilson
Released March 2009
Publisher(s): For Dummies
ISBN: 9780470714324

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Book description

The financial pages are a minefield of jargon and impenetrable terminology - they are also your key to having a true understanding of how the financial markets work, and taking full control of your investments. This plain-English guide to the financial pages demystifies the tables, charts and analysis, so you can keep on top of the latest developments in the City and have confidence that you are maximising your investment returns.

Reading the Financial Pages For Dummies includes:

The Financial Pages

  • What the Financial Pages Are

  • How the Financial Pages Work

  • How the Financial Pages Relate to the Stock Market 

  • How You Can Use the Pages to Work for You   

Using the Financial Pages to Make Basic Investments

  • Investing in Shares

  • Investing in Bonds

  • Investing in Cash Investments

Delving Deeper Into the Financial Pages

  • Sharpening Your Understanding

  • Watching Out For the Pitfalls

  • Using Charts To Monitor The Market’s Psychology

Using the Pages for More Advanced Investments

  • Going International

  • Delving into Derivatives

  • Making Money from Commodities

  • Investing in Trusts and Funds

  • Discovering More Ways to Use Managed Funds

Other Places to Go for Financial Information

  • Using the Alternatives  

  • Company Accounts

Part of Tens         

  • Ten Things to Know About a Share

  • Ten Ways to Get Your Asset Allocation Right

  • Ten Warning Signs that a Company Might be on the Ropes

  • Ten Red-Hot Clues to an Opportunity

Table of contents

  1. Copyright
  2. About the Author
  3. Acknowledgements
  4. Publisher's Acknowledgments
  5. Introduction
    1. About This Book
      1. More Than Just Numbers
      2. Finding the Right Strategy for You
    2. Conventions Used in This Book
    3. What You're Not to Read
    4. Foolish Assumptions
    5. How This Book Is Organised
      1. Part I: The Financial Pages
      2. Part II: Using the Financial Pages to Make Basic Investments
      3. Part III: Delving Deeper into the Financial Pages
      4. Part IV: Using the Pages for More Advanced Investments
      5. Part V: Other Places to Go for Financial Information
      6. Part VI: The Part of Tens
      7. Glossary
    6. Icons Used in This Book
    7. Where to Go from Here
  6. I. The Financial Pages
    1. 1. Introducing the Financial Pages
      1. 1.1. Getting into the Swim of It
      2. 1.2. Looking at the Key Players
        1. 1.2.1. Yesterday's genteel society
        2. 1.2.2. Today's drones and superheroes
        3. 1.2.3. Investigating investors
        4. 1.2.4. Considering companies
        5. 1.2.5. Finding out about financial institutions
      3. 1.3. Seeking Foreign Information
    2. 2. Looking at How the Financial Pages Work
      1. 2.1. Getting the Most out of the Statistics
        1. 2.1.1. Share prices in close detail
        2. 2.1.2. The daily price movement
        3. 2.1.3. Perusing profits
        4. 2.1.4. Puzzling out the price/earnings ratio
        5. 2.1.5. Considering company size (market capitalisation)
        6. 2.1.6. Dividends
      2. 2.2. Looking Beyond the Numbers
        1. 2.2.1. What the Numbers Don't Say
        2. 2.2.2. Reading between the lines
    3. 3. Relating the Financial Pages to the Stock Market
      1. 3.1. Revealing What the Stock Market Is and What It Does
        1. 3.1.1. Considering the international angle
        2. 3.1.2. Figuring out FTSE
      2. 3.2. Understanding What Shares Are
        1. 3.2.1. Grasping the basics on shares
        2. 3.2.2. Getting a share of the profit
        3. 3.2.3. Investigating other types of share
      3. 3.3. Looking at How the Pages Report on the Stock Market
      4. 3.4. Understanding Market Sectors
        1. 3.4.1. Recognising the difference between growth industries and mature sectors
        2. 3.4.2. Choosing the middle ground
      5. 3.5. Understanding Stock Market Indices
        1. 3.5.1. Seeing how indices can move shares
        2. 3.5.2. Getting into the FTSE-100 index
        3. 3.5.3. Finding indices
      6. 3.6. Looking at Market Realities
        1. 3.6.1. Understanding how macro factors move markets
          1. 3.6.1.1. Assumption 1: Strong economic growth is a good thing
          2. 3.6.1.2. Assumption 2: A big trade surplus is desirable
          3. 3.6.1.3. Assumption 3: A strong currency is desirable
          4. 3.6.1.4. Assumption 4: Inflation is your enemy
          5. 3.6.1.5. Assumption 5: Debt is generally a bad thing
          6. 3.6.1.6. Assumption 6: Behaving responsibly is good for your bottom line
        2. 3.6.2. Avoiding the madness of crowds
          1. 3.6.2.1. Seeing through the New Paradigm
          2. 3.6.2.2. Making currency decisions
          3. 3.6.2.3. Keeping your head
        3. 3.6.3. Understanding how the standard business cycle works
      7. 3.7. Interpreting Important Stock Market Buzzwords
        1. 3.7.1. Sentiment
        2. 3.7.2. Momentum
        3. 3.7.3. Liquidity
        4. 3.7.4. High beta
        5. 3.7.5. Points
    4. 4. Using the Pages to Your Advantage
      1. 4.1. Choosing Your Basic Strategy
        1. 4.1.1. Are you a bull or a bear?
        2. 4.1.2. Common investing approaches
          1. 4.1.2.1. Income investing
          2. 4.1.2.2. Long-term buy-and-hold investing
          3. 4.1.2.3. Value investing
          4. 4.1.2.4. Day trading
          5. 4.1.2.5. Contrarian investing
          6. 4.1.2.6. And finally, a bit of everything
      2. 4.2. Choosing Between Investment Channels
        1. 4.2.1. Direct ownership
        2. 4.2.2. Nominee accounts
        3. 4.2.3. Trusts
  7. II. Using The Financial Pages to Make Basic Investments
    1. 5. Investing in Shares
      1. 5.1. Different Shares for Different People
        1. 5.1.1. Following tortoises and hares
        2. 5.1.2. Focusing on your own risk tolerance
      2. 5.2. Using the Information in the Financial Pages
        1. 5.2.1. Reading the information correctly
        2. 5.2.2. Using the information to make decisions
        3. 5.2.3. Selling, and why it's harder than buying
        4. 5.2.4. Taking a closer look at price/earnings ratios
          1. 5.2.4.1. Interpreting historical price/earnings ratios
          2. 5.2.4.2. Avoiding p/e traps
        5. 5.2.5. Valuing a company that doesn't have any earnings
        6. 5.2.6. Understanding market capitalisation
        7. 5.2.7. Delving into dividends
        8. 5.2.8. Understanding debt ratios
          1. 5.2.8.1. Allowing for assets
          2. 5.2.8.2. Accepting that debt is good
          3. 5.2.8.3. Using a rights issue
          4. 5.2.8.4. Disguising debts
        9. 5.2.9. Getting more information about debt
      3. 5.3. Comparing Stocks with Cash
    2. 6. Investing in Bonds
      1. 6.1. Getting Comfortable with Bonds
        1. 6.1.1. Understanding the upside-down logic of bonds
        2. 6.1.2. Knowing what makes a bond price move
        3. 6.1.3. Browsing benchmarks
        4. 6.1.4. Buying bonds
      2. 6.2. Government Bonds
        1. 6.2.1. Looking at government bonds
        2. 6.2.2. Understanding bond rating systems
        3. 6.2.3. What you find in the papers – and why
        4. 6.2.4. Getting down to business with some quotations
        5. 6.2.5. Looking at the international scene
      3. 6.3. Corporate Bonds
      4. 6.4. Junk Bonds: A High-Risk Alternative
        1. 6.4.1. Why they call these bonds junk
        2. 6.4.2. 'Sub-investment grade' paper
    3. 7. Investing in Cash Investments
      1. 7.1. Everybody Needs Some Cash
      2. 7.2. The Tax Issue
      3. 7.3. Talking About Time
        1. 7.3.1. Running fast to stay ahead of inflation
      4. 7.4. Getting Price Information
      5. 7.5. Knowing Your APRs from your AERs
        1. 7.5.1. Working out the APR
        2. 7.5.2. Working out the AER
      6. 7.6. Dodging Sneaky Bank Tricks
  8. III. Delving Deeper into the Financial Pages
    1. 8. Sharpening Your Understanding
      1. 8.1. Understanding Statutory Announcements
        1. 8.1.1. When does a company have to make a regulatory announcement?
        2. 8.1.2. When a company hits the skids
        3. 8.1.3. 'Responding to press comment': Emergency announcements, updates, and what to do about them
        4. 8.1.4. Changes to controlling shareholdings
        5. 8.1.5. The takeover rules
      2. 8.2. How the Media Is Regulated
      3. 8.3. Valuing a Company Correctly
        1. 8.3.1. Putting a price on a company with no profits
        2. 8.3.2. Appraising goodwill, patents, and other intangibles
          1. 8.3.2.1. Patents
          2. 8.3.2.2. Goodwill
          3. 8.3.2.3. Brand names
        3. 8.3.3. Weighing up takeover potential
      4. 8.4. A Closer Look at Fixed Asset Valuations
        1. 8.4.1. Considering depreciation
        2. 8.4.2. Valuing property
        3. 8.4.3. A property sector whose value simply disappears
      5. 8.5. Checking Future Pension Liabilities
    2. 9. Watching Out for the Pitfalls
      1. 9.1. Avoiding Common Mistakes
        1. 9.1.1. Price falls on ex-dividend dates
        2. 9.1.2. Scrip issues and consolidations
        3. 9.1.3. Collapsing valuations: Falling knives and the dead cat bounce
        4. 9.1.4. Free float and golden shares: How they affect volatility
        5. 9.1.5. EBITDA
      2. 9.2. Spotting a Company's Hidden Debts
      3. 9.3. Shorting – and Why It So often Ends in Tears
        1. 9.3.1. 'Bear raids': Ganging up on the victim
        2. 9.3.2. Getting information about shorting volumes
    3. 10. Monitoring the Market's Psychology Using Charts
      1. 10.1. Understanding What Charts Can Tell You and What They Can't
        1. 10.1.1. Driving on emotions
        2. 10.1.2. Viewing charts realistically
      2. 10.2. Looking for Patterns
        1. 10.2.1. Double tops
        2. 10.2.2. Head and shoulders
        3. 10.2.3. Rising floors, support levels, and resistance levels
        4. 10.2.4. Triangles
        5. 10.2.5. The Elliott Wave theory
      3. 10.3. Using Charts to Check Your Decisions
  9. IV. Using the Pages for More Advanced Investments
    1. 11. Going International
      1. 11.1. Why You Need Foreign Shares in Your Portfolio
      2. 11.2. Riding the Macro Waves
      3. 11.3. Investing in Emerging Markets
      4. 11.4. Finding Information on International Investments
        1. 11.4.1. Using comparison charts
        2. 11.4.2. Locating information on individual companies
        3. 11.4.3. Overlooking structural differences
      5. 11.5. Understanding Currency Risks and Using Them to Your Advantage
    2. 12. Delving into Derivatives
      1. 12.1. Finding Out about Futures
        1. 12.1.1. The perils of leverage
        2. 12.1.2. Hedging with futures contracts
        3. 12.1.3. Companies that hedge their own prices!
        4. 12.1.4. Why you don't find many futures prices in the papers
      2. 12.2. Weighing Up Warrants
      3. 12.3. Casting an Eye Over Options
    3. 13. Making Money from Commodities
      1. 13.1. Introducing Commodities
        1. 13.1.1. Understanding the long-term argument for minerals
          1. 13.1.1.1. Describing how the cyclical process works
          2. 13.1.1.2. Considering exceptions to the cyclical process
        2. 13.1.2. Getting started on commodity investing
        3. 13.1.3. Finding price information
      2. 13.2. Investing in Oil
        1. 13.2.1. Getting started
        2. 13.2.2. Finding price information
        3. 13.2.3. Can anyone forecast the oil price?
        4. 13.2.4. Drillers, explorers, and producers
      3. 13.3. Investing in Food Commodities
        1. 13.3.1. The DJ-AIG commodity indices
        2. 13.3.2. Finding price information
      4. 13.4. Investing in Gold and Other Precious Metals
        1. 13.4.1. Finding price information
        2. 13.4.2. Choosing gold certificates and Exchange Traded Funds
        3. 13.4.3. Investing in silver, platinum, palladium, and the rest
        4. 13.4.4. Discovering gold collectable coins
        5. 13.4.5. Finding prices information
      5. 13.5. Investing in Less Glamorous Commodities
        1. 13.5.1. Uranium
        2. 13.5.2. Finding price information
    4. 14. Investing in Funds and Trusts
      1. 14.1. Employing a Professional Pilot
        1. 14.1.1. Utilising expert knowledge
        2. 14.1.2. Considering the autopilot advantage
      2. 14.2. Sourcing Information
        1. 14.2.1. TIDMs, SEDOLs, and ISINs
        2. 14.2.2. Where's your manager gone?
      3. 14.3. Unit Trusts
        1. 14.3.1. Understanding unit trusts
        2. 14.3.2. Finding unit prices
        3. 14.3.3. Choosing between a business sector and a geographical sector
        4. 14.3.4. Introducing UCITS and OEICs
      4. 14.4. Investment Trusts
        1. 14.4.1. Understanding discounts and premiums
        2. 14.4.2. Finding information on the 'invisible' investment category
        3. 14.4.3. Realising why investment trusts are volatile
    5. 15. Discovering Hedge Funds, Bonds, and ETFs
      1. 15.1. Assessing Hedge Funds
        1. 15.1.1. Understanding why hedge funds are different
        2. 15.1.2. Considering whether hedge funds are becoming respectable at last
      2. 15.2. Gauging Guaranteed Income Bonds
        1. 15.2.1. Understanding how 'structured products' work
        2. 15.2.2. Locking up your money for a fixed period
        3. 15.2.3. Taking those marketing claims with a pinch of salt
        4. 15.2.4. Avoiding precipice bonds
      3. 15.3. Exchange-Traded Funds
        1. 15.3.1. Understanding how ETFs work
        2. 15.3.2. Finding out what's available in the UK
        3. 15.3.3. Buying foreign-listed ETFs
  10. V. Other Places to Go for Financial Information
    1. 16. Using the Alternatives
      1. 16.1. Online Resources
        1. 16.1.1. 'Official' websites
          1. 16.1.1.1. The London Stock Exchange
          2. 16.1.1.2. RNS statutory announcements
        2. 16.1.2. 'Unofficial' Websites
          1. 16.1.2.1. FT.com
          2. 16.1.2.2. London South East
          3. 16.1.2.3. Thisismoney
          4. 16.1.2.4. iii
          5. 16.1.2.5. Hemmington Scott
          6. 16.1.2.6. Trustnet
          7. 16.1.2.7. Oanda
          8. 16.1.2.8. Kitco
          9. 16.1.2.9. BBC
      2. 16.2. Discussion Forums, and Why You Need Them
        1. 16.2.1. The Motley Fool
          1. 16.2.1.1. ADVFN
        2. 16.2.2. Blogs
      3. 16.3. Investment Magazines
        1. 16.3.1. Discovering the charm of a monthly read
        2. 16.3.2. Valuing independent reportage
      4. 16.4. The Foreign Press
      5. 16.5. Reports, Tipsheets, and Newsletters
        1. 16.5.1. Analysing brokers' analyst reports
        2. 16.5.2. Assessing tipsheets and newsletters
    2. 17. Understanding Company Accounts
      1. 17.1. Introducing Company Accounts
        1. 17.1.1. Getting hold of the accounts
        2. 17.1.2. Working out how much you really need to know
      2. 17.2. Reading a Profit and Loss Account
      3. 17.3. Understanding the Balance Sheet
      4. 17.4. Interpreting the Cash Flow Statement
      5. 17.5. Understanding What Can Go Wrong
      6. 17.6. Looking at Five-year Summaries
  11. VI. The Part of Tens
    1. 18. Ten Things to Know about a Share
      1. 18.1. Knowing What the Share Price Has Done During the Last Five Years
      2. 18.2. Knowing the Company's Stock Market Size
      3. 18.3. Knowing the Price/Earnings Ratio
      4. 18.4. Looking at the Dividend, and Deciding Whether Current Profits Can Cover It
      5. 18.5. Finding Out When the Next Dividend Payment Is Due
      6. 18.6. Reading the Profit and Loss Statement
      7. 18.7. Looking at the Balance Sheet
      8. 18.8. Knowing What Other Debts the Company Has
      9. 18.9. Looking at the Directors' Statements
      10. 18.10. Checking the Buzz on Online Forums
    2. 19. Ten Ways of Making Sure Your Asset Allocation Fits You Perfectly
      1. 19.1. Assessing Your Life Situation
      2. 19.2. Adjusting the Balance
      3. 19.3. Considering Whose Money You're Managing
      4. 19.4. Deciding Between Capital Gains and Income for Tax Purposes
      5. 19.5. Deciding How Long You Can Afford to Lock in Your Money if Everything Goes Wrong
      6. 19.6. Figuring Out Your Attitude to Debt
      7. 19.7. Asking Whether You Enjoy the Investment Game for Its Own Sake
      8. 19.8. Figuring Out Whether You're a Herd Follower or a Maverick
      9. 19.9. Making Sure You Know How Important This Money Is to You
      10. 19.10. Asking Whether You Can Get Over a Mistake
    3. 20. Ten Warning Signs that a Company May Be on the Ropes
      1. 20.1. Profits Are Stagnant or Falling
      2. 20.2. The Dividend Cover Is Looking Stretched
      3. 20.3. The Share Price Is Below Its 200-day Moving Average
      4. 20.4. Directors Are Selling Their Shares
      5. 20.5. The Sector Is Troubled, with No Obvious Upturn in Sight
      6. 20.6. The Company Depends Heavily on a Client Who's in Trouble
      7. 20.7. A Merger Approach Looks like Falling Through
      8. 20.8. New Reporting Regulations Have Exposed a Pensions 'Black Hole'
      9. 20.9. A Recent Merger Doesn't Seem to Have Produced any Useful Synergies
      10. 20.10. The Auditors Have Qualified the Company's Accounts
    4. 21. Ten Red-Hot Clues to an Opportunity
      1. 21.1. The Price/Earnings Ratio Is Below the Sector Average, but Rising
      2. 21.2. Like-For-Like Sales Are Up Strongly
      3. 21.3. Brokers' Recommendations Improve
      4. 21.4. The Company Is about to Be Promoted into the FTSE-100
      5. 21.5. The Economic Cycle Is Moving to Favour Companies like Your Target
      6. 21.6. The Underlying Macro-environment Is Improving
      7. 21.7. The Share Price Has Been Unfairly Devastated
      8. 21.8. Predators Are Circling the Company
      9. 21.9. The Company Has Announced a Technical Breakthrough
      10. 21.10. The Company Earns Its Money in a Currency that's Set to Strengthen
  12. A. Glossary

Product information

  • Title: Reading the Financial Pages for Dummies®
  • Author(s): Michael Wilson
  • Release date: March 2009
  • Publisher(s): For Dummies
  • ISBN: 9780470714324