Introduction 1
About This Book 2
Foolish Assumptions 3
Icons Used in This Book 3
Beyond the Book 4
Where to Go from Here 4
Part 1: The Essentials of Stock Investing 5
Chapter 1: Surveying the World of Stock Investing 7
Understanding the Basics 8
Preparing to Buy Stocks 9
Knowing How to Pick Winners 10
Recognizing stock value 10
Understanding how market capitalization affects stock value 11
Sharpening your investment skills 12
Chapter 2: Taking Stock of Your Financial Situation and Goals 15
Establishing a Starting Point by Preparing a Balance Sheet 16
Step 1: Have an emergency fund 17
Step 2: List your assets in decreasing order of liquidity 18
Step 3: List your liabilities 20
Step 4: Calculate your net worth 22
Step 5: Analyze your balance sheet 22
Funding Your Stock Program 24
Step 1: Tally up your income 26
Step 2: Add up your outgo 26
Step 3: Create a cash flow statement 27
Step 4: Analyze your cash flow 28
Another option: Finding investment money in tax savings 28
Setting Your Sights on Financial Goals 29
The Shape of Equities: Stocks, ETFs, and Mutual Funds 30
Mutual fund equities 31
Exchange-traded fund (ETF) equities 31
Canadians in Their 20s and 30s: Setting the Foundations 32
Determining the right allocation to stocks and other equities 33
Start off by investing in big picture themes 34
Your Tax-Free Savings Account (TFSA) as a tax-free stock investing account 35
Invest in your company registered pension or retirement savings plan 36
Canadians in Their 40s 36
Exploring common investment portfolio allocations to stocks 37
Taxes, company pensions, and Registered Retirement Savings Plans (RRSPs) 38
50+ Canadian Stock Investors 38
Revisiting your allocation to stocks 39
Taxes, registered pensions, and Registered Retirement Income Funds (RRIFs) 40
Chapter 3: Common Approaches to Stock Investing 41
Matching Stocks and Strategies with Your Goals 42
Investing for the Future 43
Focusing on the short term 43
Considering intermediate-term goals 45
Preparing for the long term 45
Investing for a Purpose 46
Making money quickly: Growth investing 46
Making money steadily: Income investing 47
Investing for Your Personal Style 49
Conservative investing 49
Aggressive investing 50
Chapter 4: Recognizing Risk and Volatility 51
Exploring Different Kinds of Risk 52
Financial risk 52
Interest rate risk 54
Market risk 57
Inflation risk 58
Liquidity risk 58
Foreign exchange risk 58
Tax risk 59
Political and governmental risks 59
Personal risks 60
Emotional risk 61
Getting the Scoop on Volatility 63
Minimizing Your Risk 64
Gaining knowledge 64
Staying out until you get a little practice 64
Putting your financial house in order 66
Diversifying your investments 66
Weighing Risk against Return 67
Chapter 5: Investing in Canadian Exchange-Traded Funds 69
Comparing Exchange-Traded Funds and Mutual Funds 70
The differences 70
The similarities 71
Choosing an Exchange-Traded Fund 72
Main types of ETFs 72
Bearish ETFs 76
Taking Note of Indexes 77
Part 2: Before You Jump In 81
Chapter 6: Gathering Information 83
Looking to Stock Exchanges for Answers 84
Grasping the Basics of Accounting and Economics 86
Accounting for taste and a whole lot more 86
Understanding how economics affects stocks 87
Staying on Top of Financial News 91
Figuring out what a company's up to 92
Discovering what's new with an industry 92
Knowing what's happening with the economy 92
Seeing what politicians and government
bureaucrats are doing 93
Checking for trends in society, culture, and entertainment 93
Reading and Understanding Stock Tables 94
52-week high 95
52-week low 95
Name and symbol 96
Dividend 96
Volume 96
Yield 98
P/E 98
Day last 99
Net change 99
Using News about Dividends 99
Looking at important dates 99
Understanding why certain dates matter 101
Evaluating or Ignoring Investment Tips 101
Chapter 7: Going for Brokers 103
Defining the Broker's Role 103
Distinguishing between Full-Service and Discount Brokers 105
At your disposal: Full-service brokers 105
Just the basics: Discount brokers 107
Choosing a Broker 109
Discovering Various Types of Brokerage Accounts 109
Cash accounts 110
Margin accounts 111
Option accounts 111
Judging Brokers' Recommendations 112
Understanding basic recommendations 112
Asking a few important questions 113
Robo-advisors and Fintech 115
High tech meets equity investing 115
Terminating bad investment decisions with artificial intelligence 116
Advantages of an inhuman touch 116
What can go wrong with a short circuit? 117
Canadian Robo-advisors 119
Not just for Millennials 119
Asset allocation: What is the robo-advisor investing my money in? 120
What to watch for 121
Fees 122
Final thoughts 122
Chapter 8: Investing for Long-Term Growth 125
Becoming a Value-Oriented Growth Investor 126
Handy Growth Stock Tips 127
Look for leaders in megatrends 128
Compare company growth to industry growth 129
Consider a company with a strong niche 129
Check out a company's fundamentals 130
Evaluate a company's management 131
Notice who's buying and/or recommending a company's stock 133
Make sure a company continues to do well 135
Heed investing lessons from history 135
Exploring Small Caps and Speculative Stocks 136
Knowing when to avoid IPOs 136
Making sure a small cap stock is making money 137
Analyzing small cap stocks before investing 138
Chapter 9: Investing for Income 139
Understanding Income Stocks Basics 140
Getting a grip on dividends 140
Recognizing who's well-suited for income 141
Advantages of income stocks 141
Disadvantages of income stocks 142
Analyzing Income Stocks 144
Pinpointing your needs first 144
Checking out yield 145
Looking at a stock's payout ratio 147
Studying a company's bond rating 148
Diversifying your stocks 149
Exploring Some Typical Income Stocks 149
Utilities 149
Real estate investment trusts (REITs) 150
Royalty trusts 152
Chapter 10: Understanding Technical Analysis 153
Comparing Technical Analysis and Fundamental Analysis 154
Under the hood of technical analysis 154
The good and bad of technical analysis 156
Combining the best of both worlds 157
Using the technician's tools 158
Staying on Top of Trends 159
Distinguishing different trends 159
Looking at a trend's length 160
Using trendlines 161
Watching for resistance and support 161
Getting the Scoop on Technical Charts 163
Checking out types of charts 163
Picking out chart patterns 164
Surveying Technical Indicators 167
The Relative Strength Index 168
Moving averages 168
Moving average convergence/divergence 170
Crossovers and divergence 170
Oscillators 171
Bollinger bands 171
Part 3: Picking Winners 173
Chapter 11: Using Accounting Basics to Choose Winning Stocks 175
Recognizing Value When You See It 176
Understanding different types of value 176
Putting the pieces together 178
Accounting for Value 180
Breaking down the balance sheet 180
Looking at the income statement 184
Tooling around with ratios 189
Chapter 12: Decoding Company Documents 195
Reading Annual Reports 196
Analyzing the annual report's anatomy 197
Going through the proxy materials 200
Dig Deeper: Getting a Second Opinion 201
SEDAR, SEDI, and the SEC 201
Value Line 204
Standard & Poor's 204
Moody's Investment Service 205
Brokerage reports 205
Doing Your Own Research 207
Chapter 13: Sectors, Small Caps, and the Marijuana Space 209
Telling the Difference between a Sector and an Industry 210
Interrogating the Sectors and Industries 211
Which category is the industry fall in? 211
Is the sector growing? 212
Are the sector's products or services in demand? 214
What does the industry's growth rely on? 214
Is the industry dependent on another industry? 215
Who are the leading companies in the industry? 215
Is the industry a target of government action? 216
Outlining Traditional and Key Canadian Sectors and Industries 216
Resources and commodities 217
Moving in: Real estate 219
Banking on it: Financials 220
Exploring Small Caps and Speculative Stocks in Any Sector 221
The attractive potential of small cap stocks 221
Knowing when to avoid IPOs 222
Making sure a small cap stock is making money 223
Analyzing small cap stocks before you invest 223
Marijuana Stock Investing in Canada 224
Rules of the game 224
A plant by any other name 225
Why invest in marijuana stocks? 226
Legal and regulatory risk factors 228
Evaluating micro cap marijuana stocks 229
Chapter 14: Investing in Asian Stock Markets 231
Why Invest in Asia? 232
The numbers tell a story 232
Yes, but 233
Investing in Chinese Stocks Directly 233
Open a brokerage account and buy Hong Kong dollars or yuan 234
Access the Hong Kong Stock Exchange and other exchanges 236
Look up and buy stock using local stock tickers 240
Investing in American Depository Receipts (ADRs) of Chinese Companies 241
Other Ways to Invest in China 243
Investing in Chinese companies on U.S non-ADR exchanges 243
North American multinationals in China 243
Investing in ETFs 244
Investing in country or regional funds 244
Chapter 15: The Big Economic and Political Picture 245
Tying Together Politics and Stocks 246
The effects of politics on stock investing 247
Ascertaining the political climate 248
Nonsystemic and systemic effects 249
Understanding price controls 250
Central banks 251
Poking into Political Resources 251
Government reports to watch out for 252
Websites to surf 254
Part 4: Investment Strategies and Tactics 255
Chapter 16: Discovering Screening Tools 257
Understanding Screening Tool Basics 258
Choosing the category 258
Distinguishing min vs max 258
Setting value ranges 259
Searching regardless of your entry 259
Touring a Stock Screening Tool 259
Sector and industry categories 260
Region 261
Sales and profitability 262
Valuation ratios 263
Analyst estimates 266
Checking Out an ETF Screening Tool 266
Asset class 267
Geographic area 268
Inverse and leveraged ETFs 268
Other considerations 268
Chapter 17: Understanding Brokerage Orders and Trading Techniques 269
Checking Out Brokerage Orders 270
On the clock: Time-related orders 270
At your command: Condition-related orders 272
The joys of technology: Advanced orders 277
Buying on Margin 278
Examining marginal outcomes 279
Maintaining your balance 280
Striving for success on margin 280
Going Short and Coming Out Ahead 281
Setting up a short sale 282
Oops! Going short when prices grow taller 283
Feeling the squeeze 283
Chapter 18: Using Trade Triggers and Advanced Conditional Orders 285
Trying Trade Triggers 286
Surveying different types of trade triggers 286
Entering trade triggers 288
Considering Advanced Conditional Orders 289
Checking out different types of advanced conditional orders 289
Placing advanced conditional orders 291
Chapter 19: Bitcoin and Alternative Digital Currencies 293
The Look and Feel of a Freshly Minted Cryptocurrency 294
What is digital or crypto currency? 294
Is cryptocurrency really currency? 295
And the verdict is 295
The Blockchain: Recording Your Cryptocurrency on a Public Ledger 296
Encryption: The Key to Anonymity and Security on the Blockchain 298
Your public key 299
Your private key 299
Mining for Bitcoin Gold 300
Bitcoin: The 500-Pound Digital Currency Gorilla 301
New Kids on The Blockchain: Altcoins 302
Coins or altcoins 303
Tokens 303
Buying and Selling Cryptocurrencies on Digital Currency Exchanges 304
Broker exchanges 305
Trading exchanges 305
Decentralized trading exchanges 306
Peer-to-peer exchanges 307
Canadian cryptocurrency exchanges 307
Selecting the right exchange for you 309
Setting up your first digital exchange accounts 310
Regulatory Oversight and Fraud: Caveat, Emptor! 311
Picking Winners: First Determine Value 313
Evaluating the factors that move digital currency prices 314
What moves Bitcoin's value, the crypto leader? 314
What moves all individual cryptocurrencies? 315
What will enhance digital currency adoption and move crypto markets? 320
Final thoughts on value and picking the right digital currency 322
Holding Your Crypto Assets in a Wallet 322
Software wallets: Desktop, online, and mobile 323
Hardware and paper wallets 323
Multicurrency wallets 324
Will that be hot or cold? 325
Brain wallet 326
Final Thoughts 326
Chapter 20: Skullduggery: Looking at Insider Activity 329
Tracking U.S Insider Trading 330
Checking Out Canadian Insider Trading 331
Looking at Insider Transactions 332
Breaking down insider buying 333
Picking up tips from insider selling 334
Considering Corporate Stock Buybacks 335
Understanding why a company buys back shares 336
Exploring the downside of buybacks 337
Stock Splits: Nothing to Go Bananas Over 338
Ordinary stock splits 339
Reverse stock splits 339
Chapter 21: 'Cause I'm the Tax Man 341
Interest Income 342
Dividend Income 343
Grossed out 344
Stock dividends and splits 344
Capital Gains and Losses 345
Superficial losses 345
Foreign Exchange Gains and Losses 346
Deferred-Income Tax Shelters and Plans 346
Registered Retirement Savings Plans (RRSPs) 346
Tax-Free Savings Accounts (TFSAs) 350
Registered Retirement Income Funds (RRIFs) 350
There's a catch 351
Invest Inside or Outside Your RRSP? 351
Things to Remember: Recap 352
Things to consider 352
Ways to look at the RRSP debate 353
Mutual Funds 353
Oil, Gas, and Mineral Stock Investments 354
Part 5: The Part of Tens 355
Chapter 22: Ten Indicators of a Great Stock 357
The Company Has Rising Profits 357
The Company Has Rising Sales 358
The Company Has Low Liabilities 359
The Stock Is at a Bargain Price 360
Dividends Are Growing 360
The Market Is Growing 361
The Company Is in a Field with a High Barrier to Entry 362
The Company Has a Low Political Profile 362
The Stock Is Optionable 363
The Stock Is Benefiting from Favorable Megatrends 364
Chapter 23: Ten Ways to Profit in a Bear Market 365
Find Good Stocks to Buy 365
Hunt for Dividends 366
Unearth Gems with Bond Ratings 366
Rotate Your Sectors 367
Go Short on Bad Stocks 368
Carefully Use Margin 368
Buy a Call Option 369
Write a Covered Call Option 369
Write a Put Option to Generate Income 370
Be Patient 370
Chapter 24: Ten Investments and Strategies 371
Gold 371
Nonstock ETFs 372
Inverse ETFs 372
Covered Call Options 373
Put Options 373
Tangibles 374
Cash 374
Motif Investing 375
Bearish Exchange-Traded Funds 375
Dividend Yield Exchange-Traded Funds 376
Part 6: Appendixes 377
Appendix A: Resources For Stock Investors 379
Appendix B: Financial Ratios 391
Index 401
