Getting Started in Shares For Dummies (4^th Ed., 4th Australian Edition)

Learn to invest in some of the most powerful financial instruments available today - written specifically for Australian investors!

Getting Started in Shares For Dummies, 4th Australian Edition is an essential resource for anyone who?s ever wondered whether they were missing out by not investing in shares. Written by celebrated Australian personal finance author and consultant James Dunn, this book takes a no-nonsense approach to share investment. It shows readers what to do, how to do it, and what to never, ever do.  

Free of confusing jargon and industry buzzwords, Getting Started in Shares For Dummies offers essential and straightforward guidance on: 

• How the market works 
• How a stock exchange like the Australian Securities Exchange (ASX) operates 
• How to assess potential share investments 
• What brokers really do 
• How to minimize risk and maximize upside potential 
• The tax implications of share investing 

The author provides practical advice and concrete strategies designed to help readers get started investing in shares. He also includes lessons gleaned from ten legendary investors and how they apply to everyday people. 

Getting Started in Shares For Dummies is perfect for anyone who doesn?t want to miss yet another opportunity to invest in shares and for more seasoned investors who want to brush up on the basics before engaging a new broker.  

Introduction 1

About This Book 2

Foolish Assumptions 4

Icons Used in This Book 4

Where to Go from Here 5

Part 1: Putting The Share In Sharemarket 7

Chapter 1: So, You Want to Invest in Shares 9

Investing Is All about Timing 9

Finding Out What a Share Is 14

Sharing the profit, not the loss 15

Understanding the market in sharemarket 16

Buying Shares to Get a Return 17

Earning a profit 17

Investing carefully to avoid a loss 18

Making the Most of Share Investing 18

Capital growth 19

Dividend income 19

Shareholder discounts 19

Liquidity 20

Divisibility 20

Guarding Against Risk 20

Chapter 2: Watching the market operate 29

Floating: The Primary Market 29

Understanding why companies float 30

Raising money 33

Planning the Prospectus 34

Trading: The Secondary Market 35

Finding the market action at ASX Trade 35

Buying and selling for everyone 37

Working with a go-between 38

Using the Index 38

The All Ordinaries index 40

The S&P/ASX 200 index 40

The Dow Jones 40

The Nasdaq 41

The S&P 42

The Footsie and the rest 42

The mighty MSCI 42

Stepping into the Futures Market 43

Part 2: Investing Strategies For Success 45

Chapter 3: Developing an Investment Strategy 47

Getting Rich Slowly 48

Giving yourself time in the market 48

Compounding magic 50

Starting with Strategy 51

Spreading the risk 51

Setting your goals 53

Setting your time frame 53

Setting your risk tolerance 53

Setting your financial needs 54

Buying and Holding 54

Timing your strategies 57

Trading on your portfolio 57

Timing for the long run 58

Working Out Why Share Prices Change 65

Influences on the price of a share 66

Pricing and liquidity 67

Earnings, earnings, earnings 68

The pull of the P/E 70

The tyranny of expectations 71

Watch out for announcements 72

Profits, expectations and ‘confession season’ 73

Boosting power of takeover bids 76

Chapter 4: Assessing Your Risk 81

Gambling or Investing? 82

The bad news: Risk is inescapable 85

The good news: Risk is manageable 85

Spreading the news: Risk increases your return 87

Assessing Your Risk 87

Market risk 88

Financial risk 89

Commodity risk 93

Liquidity risk 94

Business risk 94

Product risk 96

Legislative risk 98

Technical risk 100

Engineering risk 101

Project risk 101

Valuation risk 103

Political risk 104

Expansion risk 106

Currency risk 108

Specific risk 109

Sector risk 110

Fraud risk 111

Agency risk 112

Non-financial risk 113

Information risk 118

Avoiding the Turkeys 118

Using technical analysis 118

Watching cash flow119

Charting dividend changes 119

Gauging who’s selling — or buying 119

Chapter 5: Eggs and Baskets 123

Spreading the Risk 124

Building a Portfolio 130

Buying growth stocks 130

Finding value stocks 135

Knowing How Many Stocks to Buy 138

Picking your sectors 138

Choosing core stocks 140

Evaluating second-liners 144

Gambling on specs 146

Diversifying through Managed Funds 146

Investing outside Australia 152

Considering Alternative Investments 158

Part 3: Buying, Buying, Sold 161

Chapter 6: Buying and Selling Shares 163

Finding the Market164

Setting the pace — how the ASX trades 165

Getting order depth 167

Getting trade history 167

Paying your way 168

Making a Trade 168

Placing an order 169

Utilising market depth information 171

Finetuning your order 172

Closing an order 174

Working the Trading Day 175

Estimating the costs for trading 178

Making the final settlement 180

Transferring off-market 180

Buying into floats 180

The undemocratic world of allocations 184

Getting the timing right 187

Playing CHESS Isn’t a Game 187

Chapter 7: Knowing When to Buy and Sell Shares 191

Getting Ready for the Action 191

Loving your shares 192

Buying smart193

Selling smart 194

Going into Analysis 198

Using fundamental analysis 198

Working with technical analysis 203

Investing or Trading 205

Buying as an investor 205

Selling as an investor 206

Buying as a trader 209

Selling as a trader 209

Relying on Your Broker 210

Looking and Listening 213

Analysing takeovers 213

Taking note of profit warnings 214

Watching index changes 214

Capitalising on turnaround situations 215

Being a contrarian investor 215

Watching for insider activity 215

Taxing Considerations 216

Minimising capital gains tax 216

Selling to take a tax loss 216

Chapter 8: Buying What You Know 217

Acquiring Ordinary Shares 217

Buying blue chips 218

Looking at Industrial and Resources companies 220

Finding Specialised Stocks 244

Looking at listed investment companies (LICs) 245

Engaging with exchange-traded funds (ETFs) 249

Visiting the Hybrid Part of the ASX Zoo 258

Considering exchange-traded bonds 260

Moving with the mFunds market 261

Deciding What to Buy 262

Buying what you know 262

Retreating behind defensive stocks 266

Cycling your way to recovery 267

Scooping the small-caps 268

Punting on speculative stocks 268

Chapter 9: Working with Brokers 271

What a Broker Does 272

Stockbroking for Everyone 273

Buying full-service 273

Going online – or on the phone 274

Choosing the Best Broker for You 277

Fighting for full-service 278

Doing the research 278

Paying for service 279

Interviewing for a Broker 280

Making the most of full-service 283

Forging a new relationship 283

Using broker sponsorship 284

Locating the ideal broker 284

Chapter 10: Taxing Matters 285

Benefiting from Dividend Imputation 285

Franking credits made easy 286

Franking credit refund 289

Obeying the 45-day rule 291

Watching Your Capital Gains 291

Calculating your liability 291

Reducing the tax office’s take 292

Taxing Tactics 293

Tax-loss selling 293

Using a delisted dog 295

Biting on a buyback 296

Borrowing a tax deduction 297

Keeping tax breaks in perspective 297

Trading as a business 298

Keeping a record 301

Part 4: The Part of Tens 303

Chapter 11: Ten Great Investors and Their Strategies 305

Warren Buffett and Charles Munger 305

John Neff 309

Benjamin Graham 310

Philip Fisher 312

Jim Slater 313

Charles Viertel 315

Peter Lynch 316

John Bogle 317

John Templeton 317

Chapter 12: Ten Things Not To Do, Ever 319

Don’t Think You Can Get Rich Quick 319

Don’t Underestimate Volatility 320

Don’t Be Panicked Out of Your Shares 321

Don’t Ignore Dividends (Especially Franked Ones) 322

Don’t Buy a Share You Know Nothing About 323

Don’t Expect Things to Stay the Same 323

Don’t Delay a Sale to Save Capital Gains Tax 324

Don’t Let Tax Drive Your Investment Decisions 325

Don’t Fret Over Lost Profit 325

Don’t Let Yourself Be Churned 326

Index 327

James Dunn is a freelance finance journalist and commentator. The founding editor of Shares magazine, he writes for many other finance and investment magazines, newspapers and websites, and frequently appears on Australian radio and TV. He is also the author of Share Investing For Dummies, Third Australian Edition.