[...]... market should have reminded us of that What Investing Isn’t Before we start discussing what investing is, it’s important to understand what it isn’t The bear market showed us that investing is not about getting rich quick Here are some other important lessons to keep in mind: Investing is not just about stocks For several years in the 1990s people associated investing exclusively with the stock market... start to invest in a manner that is both appropriate for your circumstances and suitable to your sensibilities This page intentionally left blank INVESTING DEMYSTIFIED This page intentionally left blank PART ONE Getting Ready Copyright © 2005 by The McGraw- Hill Companies, Inc Click here for terms of use This page intentionally left blank CHAPTER 1 Why We Invest In this age of IRAs, 401(k)s, 403(b)s,... basic concepts of investing like risk and returns—but also investing jargon We begin in Chapter 1 with a discussion on ‘‘Why We Invest.’’ That’s followed in Chapter 2 with laying the groundwork We talk about all the things you have to consider ‘‘Before You Get Started.’’ In Chapter 3 we focus on ‘‘Demystifying the Language of Investing, ’’ in order to expedite our conversation about key investing terms... market, real estate market, or whatever—is not investing That’s gambling Now, for a brief, shining moment in the late 1990s, when the stock market was routinely returning 20, 25, or even 30 percent a year, investors truly felt CHAPTER 1 11 Why We Invest that things had somehow changed, and that the rules that govern investing had somehow gone away But the rules of investing change about as often as the rules... single mutual fund By 1990 that number had grown to around a quarter of all American households And by the mid- to late 1990s, more than a third of all households got into the investing game (Figure 1-1) 3 Copyright © 2005 by The McGraw- Hill Companies, Inc Click here for terms of use PART 1 4 Getting Ready Fig 1-1 Percent of U.S Households Owning Mutual Funds The number of Americans who invest in mutual... Confused? Don’t worry Once we get going on the basics of investing, all of this will seem like second nature Quiz for Chapter 1 1 Investing is the same thing as savings a True b False 2 Why are workers making more decisions about their investments? a Fewer companies offer pensions, which give retirees guaranteed income b The Internet arms people with investing information so they can take control of their... other country And buying property is one of the oldest—and best—forms of investing over long periods of time So we’re much closer to achieving this goal than you might think Investor, Educate Thyself The upshot of this is, we all need to prepare and educate ourselves—and our children—to the new realities of being members of the investing class For some of us that means seeking the help of qualified professionals,... do-it-yourself investing activity in the late 1990s, surveys have shown that a growing percentage of Americans are seeking professional financial advice For example, before the bear market of the early 2000s, around two out of five investors sought the advice of a professional planner Now, after the bear, more than half of us do This is to be expected, especially in a world where the rules for investing are... future.’’ Not only is this a cliche, it’s redundant That’s because the act of investing necessarily involves the future, on a couple of levels Obviously, the reason we invest is to be able to meet certain goals in the future—be it going on vacation, buying a house, sending children to college, or building up a nest egg But investing also takes time That means, by definition, it’s a future-oriented endeavor... exchange for something else immediately investing is just the opposite It’s all about delaying one’s gratification It involves giving up something today—i.e., the use of your money—in hopes of getting something greater back in the future That ‘‘something greater,’’ of course, is more money The interesting thing is, there is a relationship between spending money and investing it When you invest, you are .