It is better to be roughly right than precisely wrong.“
— Carveth Read
Investment comes from late 14c. Latin invest(v.)
to clothe in the official robes of an office
from Lating investire
to clothe in, cover, surround
Income
Diversification
Safety
dividends
inflation
stock
- a piece of ownership in a company
fund
bond
- a piece of debt of a company (think of it like an IOU)
options
earning
sales
dept
equity
Price-to-earnings ratio (P/E)
Price-to-sales ratio (PSR)
Return on equity (ROE)
Earnings growth
Debt-to-asset ratio
Mutual Fund
exchange-traded funds (ETF)
Index Fund
- a basket of stocks or bonds
Individual retirement accounts (IRA)
- are tax-advantaged vehicles designed for long-term savings and investment
Mutual Fund
Index fund
- An index fund is a type of mutual fund
- Passevely managed
stock option program (ESOP)
Basic
Order types
- limit order
- to sell at or above the limit price
- A limit order is an open offer to sell at a certain price or better that you publish to the market.
- A limit order is an open offer to buy at a certain price or bellow that you publish to the market.
- stop order
- A stop order is a trigger threshold, which, if passed, means your position will be sold ASAP at current market price.
- stop limit
- combination of the two above
- A stop limit order is a trigger threshold, which, if passed, creates a limit order.
Associations
Decision Markers
Checking Important Company Fundamentals before Investing in a Stock
- Earnings: This number should be at least 10 percent higher than the year before.
- Sales: This number should be higher than the year before.
- Debt: This number should be lower than or about the same as the year before. It should also be lower than the company’s assets.
- Equity: This number should be higher than the year before.
Financial Measures to Consider before Investing in a Stock
- Price-to-earnings ratio (P/E): For large cap stocks, the ratio should be under 20. For all stocks (including growth, small cap, and speculative issues), it shouldn’t exceed 40.
- Price-to-sales ratio (PSR): The PSR should be as close to 1 as possible.
- Return on equity (ROE): ROE should be going up by at least 10 percent per year.
- Earnings growth: Earnings should be at least 10 percent higher than the year before. This rate should be maintained over several years.
- Debt-to-asset ratio: Debt should be half of assets or less.
Resources
- Fail-Safe Investing: Lifelong Financial Security in 30 Minutes
Notes
Links