Understanding Wall Street, Fifth Edition (Understanding Wall Street (Paperback))
Format: PDF / Kindle (mobi) / ePub
A fully revised edition of the INVESTING CLASSIC
For over 30 years this comprehensive, easy-to-read guide has served well as the definitive reference for successful investing. Now in its fifth edition and completely updated, Understanding Wall Street helps investors prosper in today’s challenging economy―whether you’re just beginning or among the millions soon to retire.
Understanding Wall Street, Fifth Edition, has new sections and information on the issues most important to today’s investors, including:
- How to use the Internet as an investing tool
- The shift to exchange traded funds (ETFs)
- The link between Wall Street and Main Street
- The Risks and rewards of the global economy
Praise for previous editions of Understanding Wall Street:
“Recommended. An excellent introduction to stock market intricacies.” ―Booklist
“A lucid guide to those downtown mysteries.” ―Newsday
“Remarkable . . . it remains as useful as ever . . . Experience may be the best teacher, but this manual runs a close second.” American Library Book Review
Analyzing Your Company This page intentionally left blank Introduction The company with the best-performing stock over the long run—ten or twenty years—almost always has a superior record of earnings, dividends, and improved financial condition. An individual investor will find it easier to identify such a company once the rudiments of security analysis are mastered. The unfortunate situations that investors have encountered in recent years, including inadequate transparency and creative
executives nowadays are emphasizing “financial services,” which can include other products, such as insurance. So, these professionals have been moving into the twenty-first century sporting more esoteric titles, and with a much broader perspective. While we may still affectionately call them “stockbrokers,” in most cases today, their employers will probably apply terms such as “financial consultant” or “asset manager.” Searching for a good stockbroker is much like looking for a family doctor.
maximize return at the other end. Evidence of this principle has been documented in several thorough studies of historical rates of investment return. The table presented on the next page is based on these findings. It shows, in very general terms, the typical risk/reward choices that investors have had over the past several decades. Throughout this period, the rate of inflation averaged 2% to 4% annually. Also see the appendix. It is important to note that this risk/reward table can change
Often, with just a quick telephone call, an investor can switch money from one fund to another to achieve a different investment objective or to pursue a new investment strategy. In fact, this is one big reason to prefer mutual funds rather than ETFs. The biggest question otherwise is, how talented is the manager? All mutual funds are closely regulated by the SEC. A “prospectus” that explains the fund, its investment objectives, and the risks must be made available to all potential investors.
2002– 2003, Dell’s revenues reached $35 billion: $24.9 billion from the Americas, $6.7 billion from Europe, and $3.4 billion from the Far East. During this period, the company’s profits compounded at a 39.9% annual rate to about $0.80 per share (a purchase of 100 shares in late 1990 became 9,600 shares after seven stock splits, having a value of close to $257,000). On December 31, 2002, Dell’s stock price was $26.74, or 33 times current earnings, but down sharply from its $56.68 peak, hit in