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Investments for Dummies

If you are new to the world of investments, the following ‘investments for dummies’ advice will help you develop an understanding of investing, and perhaps lead you toward some good decisions for growing your money.

Understanding investing and finances in general can be difficult. Economics is a complicated subject that takes a lot of hard work to figure out. There are many books that can help you to understand investments and how to get them right. There are also several websites with a lot of information and step by step guides to understanding investing your money.

 

Books to help you understand the investment process

The following is a list of some of the publications that can help you to understand investments:

  • Investing for Dummies by Eric Tyson

This book, now in its 6th edition, offers advice on how to develop and manage a portfolio, invest in mutual funds, bonds, stocks, real estate and new businesses. The book will also discuss tax and coverage on changing market conditions.

 

Areas of investment that you should explore

If you are interested in learning about the investing process, the following areas are important to delve into.

  • Managing and developing an investment portfolio.
  • How best to invest in each of the investment possibilities which include stocks, mutual funds, bonds, real estate and small businesses.
  • Tax implications and laws.
  • Investing in the company who employs you.
  • Investing resources and retirement planning.

Paul Mladjenovic, author of the third edition of Investing for Dummies, and an expert on investment and finances in general, gives the following tips on investing wisely and successfully.

  1. Remember that you are not buying stock, you are buying a company.
  2. The major reason to invest in stock is because the company you are investing in is making a profit.
  3. Buying stock when the company is not making a profit is speculating.
  4. Your stock should never make up 100 percent of your assets.
  5. In a severe bear market stock is not a good investment.
  6. The price of a stock depends on its customer base, industry, the economy in general and the political climate at the time.
  7. Use common sense and logic when choosing your stock.
  8. Think carefully about why you want to invest in stock in general and why particular stock.
  9. If you feel unsecure about a company, use stop-loss orders.
  10. Even if you want to keep your stock for a long period of time, never be rigid in not selling when the market is bad.

 

How to decide if a company is worth investing in

You should always look at a company’s balance and sheet and income statement and pay particular attention to the following figures.

  • Earnings: they should show at least ten percent growth year to year.
  • Debt: they should be lower or the same as the year before, and less than the company’s assets.
  • Sales: they should be higher than the year before.
  • Equity: they should be higher than the year before.

Before you invest in stock, you should consider the following ratios:

  • Price to earnings ratio (should be under twenty)
  • Price to sales ratio (should be close to one)
  • Return on equity (should be growing by at least ten percent a year)
  • Earnings growth (should be growing by at least ten percent a year)
  • Debt to asset ratio (debt should be fifty percent of assets or less)

 

Seeking professional advice and assistance

If you are serious about investing your hard earned money you should look into finding a professional who will give you help and advice. Because investing your money can be such a risk, it is important to find a professional from a reputable company with lots of experience and a good reputation.

If you follow the advice of a trained professional, take note of the above tips, do your research and keep up to date with the changing market, there is no reason why you should not be successful.