Forbes guide to the markets becoming a savvy investor

Table of Contents Title Page Copyright Page Acknowledgements Note to the Reader About the Author Introduction Section One - Establishing a Frame of Reference Chapter - FROM “DUMB” BARTER TO INTELLIGENT AGENTS Chapter - POINT-COUNTERPOINT Stocks Mutual Funds Bonds ETFs Options Futures Summary Chapter - CONFRONTING INFORMATION OVERLOAD Investor Constraints Investor Choices Investor Safety Section Two - Stocks and Equity Markets STOCKS AND EQUITY MARKETS Chapter - VARIETIES OF STOCKS Just What is a Security, Anyway? Issuers and Underwriters: Why Does a Corporation Sell Stock to the Public? Why Investors Buy Stock Summing Up Total Return: Dividends and Capital Gains A Letter to Our Shareholders: Annual and Quarterly Reports (and Filings) Making Sense of Types, Classes, and Other Stock Categories: A Map of the World Chapter - STOCK MARKETS The Big Board The Incredible Growth of Trading and Capital National Association of Securities Dealers Automated Quotation System (Nasdaq) Technology, Dark Pools, and the Evolution of a Unified Market Chapter - THREE VIEWS OF THE NUMBERS Fundamental Analysis Technical Analysis Quantitative Analysis Chapter - WHERE TO FIND INFORMATION ON STOCKS AND FINANCIAL MARKETS A Selection of Information Sources on the Financial Markets Chapter - HOW TO BUY AND SELL STOCK Full-Service Brokers Discount Brokers Financial Intermediaries Direct Purchase If It Sounds Too Good to Be True Protecting Yourself from Stock Scams A Note on Financial Planners Section Three - Mutual Funds and Investment Companies MUTUAL FUNDS AND INVESTMENT COMPANIES Chapter - A HISTORY AND OVERVIEW OF THE MUTUAL FUND BUSINESS Open-End versus Closed-End Funds Index Funds Load versus No-Load Funds Chapter 10 - ADVANTAGES OF MUTUAL FUNDS Simplicity Diversification Access to New Issues Economies of Scale Professional Management Indexing Chapter 11 - DISADVANTAGES OF MUTUAL FUNDS Impact of One-Time Charges and Recurring Fees on Fund Performance Hidden Cost of Brokerage Some Hidden Risks of Fund Ownership Chapter 12 - SOURCES OF INFORMATION ON MUTUAL FUNDS Investment Company Institute Classification of Types of Funds Lipper Analytical Services Forbes Morningstar Chapter 13 - ALTERNATIVE INVESTMENTS Hedge Funds Funds of Hedge Funds Other Alternatives Section Four - Bonds and Other Fixed-Income Securities BONDS AND OTHER FIXED-INCOME SECURITIES Chapter 14 - SEVEN CHARACTERISTICS OF BONDS The Lifespan of Bonds Interest versus Discount Relationship of Price to Yield Four Important Yield Measures Credit Quality, Ratings, and Insurance Call and Related Features Fixed versus Floating Rates and Foreign Currencies Chapter 15 - HOW THE OTHER $30 TRILLION IS INVESTED Treasuries Corporates Mortgage-Backed Securities and Other Asset-Backed Securities Municipals Money Market Summary Section Five - Options, Futures, and Other Derivatives OPTIONS, FUTURES, AND OTHER DERIVATIVES Chapter 16 - OPTIONS Exchange-Traded Options Combination Strategies Determining the Value of an Option Chapter 17 - FUTURES A Seller’s Need to Hedge Some Buyers Need to Hedge, Too Speculation or Insurance? Maybe a Little of Both Actuals versus Cash-Settled Contracts Margin and Collateral Chapter 18 - OTHER DERIVATIVES Section Six - Summing Up Risk and Return SUMMING UP RISK AND RETURN Chapter 19 - HOW WELL ARE MY INVESTMENTS DOING? The Basics of Return Annualized Returns: Arithmetic (Simple) or Geometric (Compound)? Time-Weighted Returns versus Money-Weighted Returns Complicating Factors Chapter 20 - COMING TO GRIPS WITH THE MANY DIMENSIONS OF RISK A Definition of Investment Risk The Relativity of Risk What Is Market Risk? “It Will Fluctuate” Other Kinds of Investment Risk: From the Quantifiable to the Subjective Balancing Risk and Return Chapter 21 - A CRESCENDO OF CHANGE Again, We Ask, What Is a Market? Glossary Index Interest rate risk Interest versus discount Intermediaries Internalization Internal rate of return calculation International equity funds International Swaps and Derivatives Association (ISDA) Internet Internet Bubble Interpolating Interpolation risk Interviews with management In-the-money Intrinsic value Intrinsic value of stock Intuit Inverted yield curves Investing Investment alternatives Investment approaches bonds ETFs futures mutual funds options stocks Investment Bankers Conferences Investment Company Institute (ICI) Investment Company Institute classification of types of funds bond and income funds hybrid funds money market funds stock funds Investment objective Investment results, measuring Investment returns Investment risk balancing risk and return defined market risk quantifiable to subjective relativity of volatility and INVESTools Investor associations Investor choices Investor constraints Investor safety IPO juice Issue date (of bond) Issued stock Issuers J.P Morgan & Co Junk bond Kondratieff Wave Large capitalization (large cap) stocks Lehman Brothers Leonardo of Pisa Leverage Liabilities LIBOR-plus Life Insurance Marketing and Research Association (LIMRA) Lifespan of bonds Limit orders Limit price Lipper Analytical Services Lipper TASS Hedge Fund Data Liquidation Liquidity Liquidity risk Liquidnet Listed options Listing requirements Load Load funds London Interbank Offered Rate (LIBOR) London Stock Exchange Long-term capital appreciation Lotus 1-2-3 Lupien, Bill Madoff, Bernie Magazine publishers Majority shareholder Managed futures account Management fees Margin Marginable securities account Marginal income tax rates Margin calls Margin interest charges Marked to market Market data vendors Market Index Term Trust (MITT) Market maker Market orders Market Participation Deposits (MPDs) Market risk Markets and the new millenium genealogy of Market timers Market values Market-value-weighted index Marking to market example Markowitz, Harry Markup Massachusetts Financial Services (MFS) Massachusetts Investors Trust Maturity date (of bond) Median Medium of exchange Mergers Merrill Lynch Merton, Robert Metastock Microcap companies Microcap stocks Minority shareholder Mode Model Model risk Modern portfolio theory (MPT) Money Money-based trading compared with barter trading Money market account Money market funds Money market instruments Money-weighted rate of return Money-weighted returns versus time-weighted Moody’s Morgan, J.P Morgan Stanley Morgan Stanley Smith Barney Morningstar Mortgage-backed funds Mortgage-backed securities (MBS) Moving average Multiple securities Municipals Munis Mutual fund business Mutual Fund Fact Book Mutual fund group Mutual fund management companies Mutual fund rating services Mutual funds Mutual funds, advantages of access to new issues diversification economies of scale indexing professional management simplicity Mutual funds, disadvantages of hidden cost of brokerage hidden risks of fund ownership impact of one-time charges and recurring fees Naked call Nasdaq Nasdaq Stock Market, Inc National Association of Certified Financial Planners National Association of Investors Corporation National Association of Personal Financial Advisors (NAPFA) National Association of Securities Dealers (NASD) National Association of Securities Dealers Automated Quotation (Nasdaq) National municipal Bonds Net asset value (NAV) calculation of Newsletters and other sources of information Newspaper publishers New York Stock and Exchange Board New York Stock Exchange (NYSE) Euronext No-load funds No-load stocks Nominal dollars Nonmarket trades Nonmonetary trade Nonvoting stock Number crunchers Off-balance-sheet investments Office of the Comptroller of the Currency Offshore funds One-time charges Online brokers Oneline discount brokers Onshore funds Open-end funds Open-end mutual fund Opening price Open interest Open-outery markets Operating statement Operational risk Optimark Options combination strategies determining value of exchange-traded Options exercised Ordinary income Original issue discount (OID) Out-of-the money Outstanding stock Over-the-counter dealer-based markets Over-the-counter derivatives market Over-the-counter options Over the counter (OTC) stocks Owners’ equity Ownership interest Paper profit Par value Passively managed portfolios Pass-through tax status Pay date Payment for order flow Pennant Performance Periodic reports Perpetual bonds Philadelphia Exchange Pipeline Political risk Positive yield curves Post-modern portfolio theory (PMPT) Preemptive right Preferred stock Premium, trading at Premium bond Present value Presidential election cycle (PEC) Price target Price-weighted index Price-yield-maturity relationship Price-yield relationship Primary dealers Primary market Prime rate Principal amount Private corporation Private debt Private investments in public equity (PIPEs) Privately held corporation Private placement of stock Professional management Profit and loss (P&L) statements Promoters Prospectus sample Proxy Public companies Public debt Publicly held corporation Put Put bond Put-call parity Put option Quant Quantifiable risk Quantitative analysis Quantitative analysts Quantitative model Raise cash Ratings Real dollars Realized capital gain Recommended list Record date Recurring fees and expenses Red chip stocks Reference portfolio Refunding bonds Regional equity funds Registration Regulation T Regulatory risk Reinvestment Reinvestment risk Remargining Reorganized corporation Replicate an index Reserve Primary Fund Resistance level Results Return calculating Return on equity (ROE) Return on investment (ROI) Return relatives Reuters Reversal Reverse split Rich security Rights offerings Rising bottom Risk Risk-free rate Riskgrades RiskMetrics Rocket scientists Rollover risk Rule of Safe harbor Sales charge Samurai bonds S&P 500 Depository Receipts (SPDRs) S&P Goldman Sachs Commodity Index (A&PGSCI) Saucer Savings Bonds Scams Scholes, Myron Schwab Scrip dividends Seat on the NYSE Secondary market Sector equity funds Sector of companies Sector risk Secular bear market Secular bull market Securities Securities and Exchange Commission (SEC) questions to ask about financial products Securities Exchange Act of 1933 Securities Exchange Commission (SEC) Securities Industry and Financial Markets Association Securities Investor Protection Corporation (SIPC) insurance Security defined Selective posture Self-regulatory organization (SRO) Seller Selling climax Sell-side firms “Sell-side” research Senior debt Sensitivity of an option’s valve Sentiment (of market) Shareholders rights of Share repurchase programs Shares Shares outstanding Sharpe, William F Shaw, David Short sale Short-short rule Short-term income Sideways price move Silent trade Simple (arithmetic) return Since inception Sinking fund provisions SLUGS Smart agents Smart Money Smith Barney Smoothed data sets Socially responsible investing Soft dollars Software vendors Sources of information on mutual funds Forbes Investment Company Institute (ICI) Lipper Analytical Services Morningstar Soybean complex Spare cash SPDRs Specialists Special purpose acquisition companies (SPACs) Speculation Spin-offs Spot market Spread Stagflation Standard & Poor’s credit rating agency Standard & Poor’s (S&P) 500 Index Depository Receipts (SPDRs) Statement of condition Statement of financial position Statement of profit and loss State municipal bonds Statutory voting Stock buying and selling defined types, classes, and other categories varieties of why investors buy Stock buyback programs Stock certificate Stock dividends Stock exchanges Stock funds Stockholders’ equity Stock loan Stock markets major markets of the world Stock options Stock split Stock Trader’s Almanac 2009 Stop orders Story stock Straddle Strangle Strategic income funds Strips Strong buy ratings Subjective risk Subordinated debt Subscription rights Subsidiary Sucker’s rally Support level Survivor bias Swap agreement Swaps Swaptions Taxable money market funds Taxable munis Tax deferral vehicle Tax-exempt money market funds national state Tax-exempt municipal bonds Tax risk Technical analysis Technical analysts Technology Telechart 2007 Third Wave, The (Toffleer) Ticker Ticker symbols Time value Time value of money Time-weighted rate of return Time-weighted returns versus money-weighted Toffler, Alvin Total return Tracking error Trade and Quote (TAQ) Database Trade groups Trades Trading volume Transformed data sets Transparency Treasuries, buying Treasury Inflation Protection Securities (TIPS) Treasury stock Trendline Triple witching Friday Turnover Twain, Mark Underlying asset Underwriters United market Unrealized capital gain U.S Bureau of Public Debt U.S Department of the Treasury U.S Offshore Funds Directory U.S Treasury securities bills (T-bills) bonds notes Value Line Publishing, Inc Vanguard Vanguard’s Index Variable annuity Volatility Voting rights Voting stock Wall Street Wall Street Journal, The Wall Street Journal Interactive Edition Warrants “Wasting asset” Withdrawals World Equity Benchmark Shares (WEBS) World Wide Web Wrap accounts Writer Writers of protection Yahoo! Yankee bonds Yield Yield curve Yield measures current yield equivalent taxable yield yield to call yield to maturity Yield to call Yield to maturity Zero-coupon bonds Zero-sum game The number of beneficial holders of stock held in “street name” will be considered in addition to holders of record The Exchange will make any necessary check of such holdings †Shares held by directors, officers, or their immediate families and other concentrated holdings of 10 percent or more are excluded in calculating the number of publicly held shares ‡If the unit of trading is less than 100 shares, the requirement relating to number of publicly held shares shall be reduced proportionately The phrase fundamental analysis is also applied to a way of analyzing the economy By studying inventories, inflation, and interest rates, fundamental analysts attempt to forecast future economic conditions ... would like to thank my editors at Forbes (Vahan Janjigian and Barbara Strauch) and Wiley (Laura Walsh) for all their help and encouragement I would also like to thank Anastasia Skoybedo and Chris... Becoming a Savvy Investor The times are changed, and we change with them.” —Roman proverb What a difference a decade makes! Ten years ago, when the first edition of Forbes Guide to the Markets was... Categories: A Map of the World Chapter - STOCK MARKETS The Big Board The Incredible Growth of Trading and Capital National Association of Securities Dealers Automated Quotation System (Nasdaq)