Investing Online For Dummies®, 5th Edition

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Edition: 5th
Format: Paperback
Pub. Date: 2005-04-01
Publisher(s): For Dummies
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Summary

Everybody talks about ithow much you can save , and earn, when you start an online investment program. If you've decided you're ready to find out what all the excitement's about, you're in luck. Investing Online For Dummies has been completely revised and updated with the latest tools, Web sites, rule changes, and tips that can make online investing easy and profitable.To be a successful online investor, you need to know your way around the Web and you also need to understand something about investments. Investing Online For Dummies can help you make sound financial decisions by: Outlining basic investment fundamentals Explaining how stock options work and helping you determine the value of your employee stock option plan Pointing out costly traps and ways to avoid them Directing you to resources that provide information you need and helping you make sense of it Showing you how to use the Internet to become a savvy investor This 5 th edition of Investing Online For Dummies provides clear instructions and ample illustrations, taking you from the basics of online investing to making your own online stock transactions to purchasing bonds online. A few of the things you'll discover: What's important in an online brokerage and how to locate one that meets your needs How to find Internet resources that help you select mutual funds How to use stock online screens to find investment candidates that will move you toward your financial goals Where to look for direct stock purchase and ShareBuilder plans that let you invest online for as little as $25 a month How Internet tools can help you analyze and choose stocks and bonds The secrets to paying the lowest commissions when trading online There's so much information available on the Internet that you can easily feel overwhelmed. Investing Online For Dummies leads you through that maze, showing you how to get started, what you really need to know, where to go online to find it, and how to get the process underway. When it comes to choosing which cruise to take to celebrate your success, however, you're on your own!

Author Biography

Kathleen Sindell is the author of Managing Your Money Online For Dummies (Wiley, 2004), Safety Net: Protecting Your Business on the Internet (Wiley, 2002), Loyalty Marketing for the Internet Age (Dearborn, 2000), The Unofficial Guide to Buying a Home Online (Hungry Minds, 2000), and A Hands-On Guide to Mortgage Banking Internet Sites, a separate directory published by Mortgage Banking Magazine (2000, 1999, 1998, 1997). Dr. Sindell is a contributing author to the Encyclopedia of Computer Science (Groves Dictionaries Inc., 2000) and the online investing columnist for Investor Direct magazine (1999). She is the author of The Handbook of Real Estate Lending (McGraw-Hill Professional Publishing, 1996). Dr. Sindell is an expert on electronic commerce and is an adjunct faculty member at the Johns Hopkins University MBA program. She is the former Associate Director of the Financial Management and Commercial Real Estate Programs for the University of Maryland, University College Graduate School of Management and Technology. Dr. Sindell provides consulting and publications about management, finance, security, and real estate in the e-commerce environment. Her goal is to improve the quality of life and economic well-being of people and business organizations by providing information that they might not otherwise have or understand. She received her B.A. in Business from Antioch University, an MBA in Finance from the California State University at San Jose, and a PhD in Administration and Management from Walden University, Institute for Advanced Studies.

Table of Contents

Introduction 1(8)
Who Are You?
1(2)
About This Book
3(1)
How to Use This Book
4(1)
How This Book Is Organized
4(2)
Part I: Online Investing Fundamentals
5(1)
Part II: Finding the Right Investments
5(1)
Part III: Expanding Your Investment Opportunities
5(1)
Part IV: The Part of Tens
6(1)
What's New
6(1)
Icons Used in This Book
7(1)
Feedback, Please
7(2)
Part I: Online Investing Fundamentals 9(88)
Chapter 1: Finding Investor Stuff on the Net
11(20)
Building Your Own Online Information System
11(5)
Identifying new investments
12(1)
Analyzing investment prospects
13(1)
Purchasing investments
14(1)
Monitoring investments
15(1)
Selling investments
15(1)
Setting Up Your Basic Investment Search Strategy
16(4)
Metasearch engines
16(1)
Popular search engines
17(2)
Selecting the best search engine
19(1)
Understanding How Newsgroups Can Help You
20(2)
Finding the perfect newsgroup
21(1)
Finally, some investor news reading
21(1)
Getting the Message from Investor Message Boards
22(1)
Uncovering Investor Information from Mailing Lists
23(1)
Using Free and Fee-Based Online Investor Databases
24(2)
Totally free databases
24(1)
When all else fails - fee-based databases
25(1)
Getting Online Investor Information Geared to Your Needs
26(5)
Investor Web sites for children
27(1)
Web sites for young investors
27(1)
Other investor special-interest sites
28(3)
Chapter 2: No Experience Required: Getting Started with Online Investing
31(16)
Getting Smart Online
32(4)
Online investor tutorials
32(2)
Web sites for new investors
34(1)
Glossaries
34(2)
Maximizing Your Internet Browser with Bookmarks
36(1)
News You Can Use
37(6)
Large news organizations
38(1)
Newspapers
38(1)
Magazines
39(1)
Scholarly journals
40(1)
Multimedia investment news
41(1)
Electronic newsletters
41(2)
Practicing with Your New Investment Information
43(4)
Join the club! Become a member of an investment club
43(1)
Getting into the game: Online investment simulations
44(3)
Chapter 3: Making Your Money Work Harder
47(16)
Using the Internet to Make Financial Planning Easier
47(3)
The joys of compound interest
48(2)
Moving Some of Your Savings to Investments
50(1)
Maximizing Your Investments with Tax-Deferred Accounts
51(3)
Traditional IRAs
52(1)
Roth IRAs
52(1)
Online calculators for determining the best IRA account
53(1)
Deciding How Much Risk You Can Take
54(1)
Determining How Much You Can Invest
55(1)
Investing in Securities That Meet Your Goals
55(1)
Checking Out What the Experts Are Doing
56(3)
Analyzing the analysts
56(1)
Getting the opinions of others: Stock-picking communities
57(1)
Judging who's the real deal
58(1)
Tracking and Measuring Your Success
59(1)
Building Your Personalized Investment Plan
60(3)
Chapter 4: Selecting an Online Broker That's Right for You
63(18)
Is a Traditional Broker Best for You?
64(1)
Selecting a Premium Online Brokerage
65(1)
Selecting the Right Discount Online Brokerage
66(1)
Investigating a Brokerage Before You Invest
67(1)
Matching Your Needs to the Right Online Brokerage
67(5)
For beginners
68(1)
For mainstream investors
68(2)
For active investors
70(1)
For affluent investors
70(2)
Getting Online Trading Services for Less
72(4)
Trading online for $15 or less
73(1)
Finding online brokers with no or low initial account minimums
74(2)
Rating Online Brokers
76(1)
Checking Out Hybrid Online Banks and Brokerages
77(2)
Opening Your Online Brokerage Account
79(2)
Chapter 5: Getting Ahold of Trading Online
81(16)
Understanding the Tax Consequences of Trading Securities
81(3)
Special rates for long-term capital gains
82(1)
Measuring capital gains
83(1)
What about capital losses?
83(1)
Increasing Profits with Simple Order Specification Techniques
84(2)
ECNs - It's Not Your Grandfather's Market Anymore
86(2)
How ECNs work
86(1)
Understanding inside spreads
87(1)
Extended-Hours Trading
88(2)
Sources for extended-hours stock information
89(1)
Join the extended-hours club
89(1)
Online Trading and the Active Investor
90(4)
Active investor trading platforms
91(2)
You might be a day trader if
93(1)
Going from Hardwired to Wireless Trading
94(3)
Part II: Finding the Right Investments 97(166)
Chapter 6: The Keys to Successful Internet Mutual Fund Investing
99(22)
Mutual Fund Basics
99(5)
Discovering the differences between open-end and closed-end mutual funds
102(1)
Minimizing fees
103(1)
A Fund for You, a Fund for Me
104(2)
Finding Facts and Figures Online
106(1)
Simplifying Your Investing with Mutual Funds
107(3)
Discovering index funds
107(1)
Becoming aware of exchange-traded funds
108(2)
Mutual Funds and Your Risk Tolerance Level
110(1)
How to Screen Mutual Funds Online
111(2)
Locating and Reading the Prospectus
113(3)
Checking the facts
114(1)
Getting it right
115(1)
Analyzing Mutual Funds
116(5)
Comparing costs and returns
117(1)
Understanding mutual fund risks
118(3)
Chapter 7: Online Analysis, Buying, and Selling of Mutual Funds
121(20)
Finding the Right Mix of Investments
121(3)
Using the Internet to Help You Choose the Best Funds in Each Class
124(4)
Following a mutual fund checklist
125(1)
Reading an online mutual fund listing
126(1)
Assessing mutual fund performance
127(1)
Using Scoreboards and Ratings
128(2)
The Ratings War
130(2)
The Morningstar rating system
130(1)
The Lipper Leader system
131(1)
The Value Line rating system
131(1)
Buying Mutual Funds Online: Using an Online Broker
132(1)
Commission-Free Mutual Funds
133(2)
Starting Your Mutual Fund Account with as Little as $50
135(1)
Buying Mutual Funds Online: No Broker Needed
136(1)
The Right Time to Sell Your Mutual Funds
137(4)
Chapter 8: The Basics of Stocks and Rates of Return
141(18)
Understanding Stocks
141(1)
Participating in the Market
142(1)
Common stocks
142(1)
Preferred stocks
143(1)
Picking the Right Stock for the Right Goal
143(2)
What Does the S & P 500 Have to Do with Anything?
145(2)
Paying the Right Price
147(12)
Getting down to fundamentals
147(1)
Using online tools to value stocks
148(1)
Using the Net to calculate fair value
149(2)
Valuation model input and results
151(2)
Analysis for value shopping
153(1)
Getting technical: Technical analysis
154(2)
Technical analysis software
156(1)
Market timing
157(2)
Chapter 9: Internet Stock Screening
159(16)
Finding the Best Stock Using the Net
159(6)
Choosing the criteria for your first stock screen
160(1)
Fine-tuning your stock screen
161(1)
Using your stock screen results
161(1)
Important ratios for screening stocks
161(4)
Starting with Quick Online Stock Screens
165(1)
Using Those Terrific Prebuilt Stock Screens
166(1)
Locating Those Prebuilt Screens You Can Change Yourself
166(1)
Advanced Techniques for Building Stock Screens
167(2)
Screening for growth stocks
167(1)
Screening for income stocks
168(1)
Screening for value stocks
168(1)
Screening for Investment Bargains
169(6)
Stocks selling at below book value
169(1)
Securities selling below liquidation value
169(1)
Stocks with low P/E ratios
170(1)
Companies reporting deficits
171(1)
Prospective turnaround candidates
171(4)
Chapter 10: Using Company Information to Make Investment Decisions
175(20)
Finding Financial Statements Online
176(1)
Accessing Web Sites That Specialize in Annual Reports
177(2)
Using Web Sites That Link to Company Home Pages
179(1)
Researching a Company's SEC Filing
180(4)
The Sarbanes-Oxley Act and investors
180(1)
Downloading SEC filings in just three clicks
181(1)
SEC search engines
182(2)
Dissecting the Annual Report
184(3)
Analyzing a Financial Statement
187(1)
You Don't Have to Be a Math Whiz to Calculate Ratios
188(2)
Utilizing Prepared Online Ratio Analysis
190(1)
Understanding Bankruptcy
190(5)
High debt warning signs
191(1)
Checking out insider trading
192(3)
Chapter 11: Digging Deeper: Advanced Stock Analysis
195(26)
Turning Your Hunches into Investment Strategies
196(2)
Conquering Uncertainty with Online Research
198(3)
Gaining new investor insights with breaking news
199(1)
Business news search engines
200(1)
Locating company profiles and related data
200(1)
Gathering Business Economic and Related Data
201(5)
Business economic indicators
202(2)
Consumer economic indicators
204(1)
Financial market data
205(1)
Collecting Market Information
206(1)
Most active stocks
206(1)
Market indices
206(1)
Finding Industry and Statistical Information
207(3)
Checking out analyst evaluations
209(1)
Following upgrades and downgrades
210(1)
Zeroing In on Earnings
210(3)
Tracking down earnings estimates
211(1)
Forecasting earnings and the stock market level
212(1)
Researching the Background of Corporate Officers
213(1)
Understanding Stock Prices
214(7)
Understanding Level I stock quotes
215(2)
Discovering Level II stock quotes
217(1)
Finding ticker symbols and stock prices online
218(1)
Free delayed stock quotes
218(1)
Free real-time stock quotes
219(1)
Free wireless stock quotes
219(1)
Fee-based stock quotes
220(1)
Chapter 12: Going with Fixed-Income Securities: Which Type of Bond Is for You?
221(22)
Generic Features of Bonds
222(6)
Special benefits and exposures
223(2)
Using the Internet to find new bond offerings
225(1)
Locating those elusive bond quotes
226(1)
Finding bond indexes and historical data online
226(2)
Risks and stability
228(1)
How Small Investors Can Make Money with Fixed-Income Investments and Bonds
228(3)
When to Choose a Money Market Deposit Account (MMDA)
231(1)
The Four Basic Types of Bonds
232(8)
Uncle Sam's bonds: Treasury securities
233(2)
Federal government agency bonds
235(1)
The beauty of tax-free municipal bonds
235(3)
Floating with corporate bonds
238(1)
Using the Internet to screen bonds
239(1)
Two Alternate Types of Bonds
240(3)
Zero-coupon bonds
240(1)
Eurobonds
241(2)
Chapter 13: Valuing, Buying, and Selling Bonds Online
243(20)
The Math of Bonds
244(5)
Calculating bond values
244(1)
Creating yield curves
245(2)
The easy way to value your bond returns
247(1)
Let the Internet do the math
248(1)
Trading Bonds Online
249(1)
Nice and Simple: Savings Bonds
250(3)
The good and the bad about savings bonds
251(1)
Calculating the value of your savings bonds
252(1)
Just Uncle Sam, Treasury Securities, and You
253(1)
Buying Treasury Securities via the Internet
254(7)
Opening Treasury Direct accounts
254(1)
Opening your savings bond Treasury Direct account for as little as $25
255(1)
Treasury bills, notes, and TIPS Treasury Direct accounts
256(1)
How to buy Treasuries online
257(2)
Selling your Treasury securities
259(1)
Online sources for more information
260(1)
Increasing Your Profits with a Treasuries Ladder
261(2)
Part III: Expanding Your Investment Opportunities 263(74)
Chapter 14: Going International Online
265(16)
Taking Advantage of International Opportunities
266(1)
Getting Started with Online International Quotes and Indexes
267(1)
Gathering International News and Research
268(2)
Acquiring International Company Information
270(1)
Online Trading Abroad
271(1)
Investing in Emerging Markets
272(1)
Problems with Investing Directly in Foreign Companies
273(1)
Administration troubles
273(1)
Tax problems
273(1)
Information difficulties
274(1)
Buying ADRs Is an Easy Solution
274(2)
The risks of international investments
275(1)
Online ADR resources and research
276(1)
Indirect Foreign Investing Is a Great Approach
276(2)
Diversification through foreign funds
277(1)
Buying shares in multinational companies
278(1)
Finding International Mutual Funds Online
278(3)
Chapter 15: Looking for the Next Big Thing: IPOs, DPOs, and DRIPs
281(20)
Looking for Investment Opportunities: IPOs
282(8)
Getting the scoop on IPOs
283(1)
Understanding the limitations of IPOs
284(1)
Locating IPO online super-sites
285(3)
The Internet and your IPO timetable
288(2)
Be Your Own Broker with Direct Public Offerings (DPOs)
290(2)
Recognizing the limitations of DPOs
290(1)
Buying DPOs
291(1)
Buying Stock in a Direct Purchase Plan (DPP)
292(4)
Profiting with Dividend Reinvestment Plans (DRIPs)
296(5)
Additional features of DRIPs
297(1)
Not all DRIPs are alike
297(1)
How to get your first DRIP share
298(1)
Selecting the right DRIP
299(2)
Chapter 16: Taking the Option: Alternative Investing
301(14)
Trading Stock Options
301(3)
Types of option contracts
302(1)
Exercising your stock option
302(1)
Call options
303(1)
Put options
303(1)
Education and Data Sources
304(3)
Online sources for option quotes
305(1)
Online sources for options news and data
305(2)
Option Screeners and Calculators
307(1)
Determining Stock Option Values
308(4)
Taking a closer look at options
309(1)
Discovering what your options are worth
310(1)
Online brokerages and options
311(1)
Software Tools for Options Trading
312(2)
Checking Out the Latest Strategies
314(1)
Chapter 17: The Internet and Managing Your Portfolio
315(22)
Why Manage Your Investments?
316(1)
Tracking the Right Information
317(1)
Balancing Your Portfolio with Web-Based Asset Allocation Tools
318(1)
Using the Internet to Uncover the Risk in Your Portfolio
319(2)
RiskGrades
319(1)
FinPortfolio
320(1)
Morningstar
320(1)
Keeping the Winners and Selling the Losers: Measuring Performance
321(1)
Your Portfolio Management Options
322(1)
Purchasing Portfolio Investment Programs
323(1)
Using Web-Based Portfolio Management Programs
324(3)
Following Online News with Portfolio Tracking
327(3)
Business news
327(1)
Portal portfolio management
328(1)
Portfolio management alerts
329(1)
Using PC-Based Portfolio Management Software
330(9)
Personal finance software programs
331(1)
MS Money
331(1)
Quicken
332(1)
Portfolio management software programs
333(4)
Part IV: The Part of Tens 337(36)
Chapter 18: Ten Warnings About Cyberfraud
339(14)
Don't Believe Everything You Read
340(7)
Multilevel marketing plans and pyramid schemes
340(1)
Financial chain letters and Ponzi schemes
341(1)
Cons based on bogus research reports and newsletters
342(1)
Phishing for your personal information
343(1)
Nigerian e-mail letter investment scam
344(1)
Investment hoaxes designed to get your cash
344(1)
Bogus IRA-approved investment schemes
345(1)
Guaranteed high returns frauds
345(1)
Get rich quick with investment seminars
346(1)
Pump-and-dump schemes
346(1)
If an Offer Seems Too Good to Be True, It Usually Is
347(1)
Checking It Out Before You Put Your Money Down
348(1)
Understanding What Real Financial Disclosures Include
349(1)
Telltale Signs of Dishonest Brokers
350(2)
Where to Complain Online
352(1)
Chapter 19: Ten Important Selling Points
353(12)
Determining Your Personal Selling Rules
353(4)
The stock drops below your predetermined trading range
354(1)
You discover that the company's relative strength is flat or trending downward
355(1)
You recognize that the industry is in a serious downturn
355(1)
You determine that the company is in decline
355(1)
You discover that the company's profitability or financial health is in trouble
356(1)
Market experts call the company "steady" or dividend increases are behind the general market
356(1)
Company insiders are selling in the public marketplace
356(1)
Rebalancing Your Portfolio: Which Winners Should You Sell?
357(1)
Setting Profit-Taking Goals
358(1)
You Can't Be Right All the Time
358(1)
If the Stock Is Going Nowhere, Get Going
359(1)
Don't Be Fooled by P/E Spurts
359(1)
Watch Interest Rates
359(1)
Keep an Eye on Economic Indicators
360(1)
Sell When the Insiders Sell
360(1)
Get Out if the Company or Fund Changes
361(1)
A Final Word about Stopping Profit Wipe-Outs
361(4)
Chapter 20: Ten Green Flags for Buying
365(8)
Digging Out of a Recession with Dollar-Cost Averaging
366(1)
Buy If the Stock Is at Its Lowest Price
367(1)
Invest in Companies with Beautiful Balance Sheets
367(1)
Check Out the Earnings Forecast
368(1)
Watch for Stocks That Are Trading under Book Value
368(1)
Look for Strong Dividend Pay-Out Records
369(1)
Seek Out Firms with Low Debt Ratios
369(1)
Invest in Industry Leaders
369(1)
Buy Good Performers
370(1)
Select Your P/E Ratio Strategy
370(3)
Low P/E and high dividend approach
371(1)
High P/E ratios are worth the price
371(2)
Index 373

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