Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 3 Beyond This Book 3 Where to Go from Here 4 Part 1: The Essentials of Investing in Shares 5 Chapter 1: Exploring the Basics 7 Understanding the Basics 8 Getting Prepared before Starting 8 Knowing How to Pick Winners 9 Recognising the value of shares 9 Understanding how market capitalisation affects share values 10 Sharpening your investment skills 11 Boning Up on Strategies and Tactics 12 Getting Good Tips 13 Chapter 2: Sizing Up Your Current Finances and Setting Goals 15 Establishing a Starting Point 16 Step 1: Making sure you have an emergency fund 17 Step 2: Listing your assets in decreasing order of liquidity 17 Step 3: Listing your liabilities 20 Step 4: Calculating your net worth 21 Step 5: Analysing your balance sheet 22 It''s All about the Cash (Flow)! 23 Step 1: Tallying up your income 24 Step 2: Adding up your outgoings 25 Step 3: Creating a cash flow statement 26 Step 4: Analysing your cash flow 27 Finding investment money in tax savings 27 Setting Your Sights on Your Financial Goals 28 Chapter 3: Defining Common Approaches to Investing in Shares 31 Matching Shares and Strategies with Your Goals 32 Investing for the Future 33 Focusing on the short term 33 Considering medium-term goals 34 Preparing for the long term 34 Investing for a Reason 35 Growth investing 35 Income investing 36 Investing in Your Personal Style 38 Cautious investing 38 Aggressive investing 38 Chapter 4: Assessing the Risks 41 Exploring Different Kinds of Risk 42 Financial risk 42 Interest rate risk 42 Understanding the adverse effects of rising interest rates 44 Market risk 45 Inflation risk 46 Tax risk 46 Political and governmental risks 47 Personal risks 47 Emotional risk 48 Minimising Your Risk 50 Gaining knowledge 50 Staying out for now 51 Getting your financial house in order 51 Diversifying your investments 52 Weighing Risk against Return 53 Chapter 5: Getting to Know the Stock Markets 55 Knowing How Indices Are Measured 55 Using the Indices 57 Tracking the indices 57 Investing in indices 57 Checking Out Major Markets 58 The FTSE 100 Index 58 The FTSE 250 60 The FTSE All-Share 60 Identifying Markets for Smaller Companies 61 The Alternative Investment Market 61 Further afield: International indices 61 Considering international markets 63 Part 2: Before You Start Buying 65 Chapter 6: Gathering Information 67 Looking to Stock Exchanges for Answers 68 Understanding Shares and the Companies They Represent 69 Accounting for taste and a whole lot more 69 Understanding how economics affects shares 70 Staying on Top of Financial News 73 Figuring out what a company''s up to 74 Discovering what''s new with an industry 74 Knowing what''s happening with the economy 75 Seeing what the politicians and government bureaucrats are doing 75 Checking for trends in society, culture and entertainment 76 Reading (and Understanding) the Financial Pages 76 52-week high 77 52-week low 78 Name and code 78 Dividend 78 Volume 79 Yield 80 P/E 80 Price 81 Change 81 Using News about Dividends 81 Looking at important dates 81 Understanding why these dates matter 83 Evaluating (Avoiding?) Investment Tips 84 Chapter 7: Finding a Broker 85 Defining the Broker''s Role 85 Identifying the Options: Online, Offline, Advisory and Leverage 87 The old model: Advisory and discretionary 87 How the old model has changed 88 What to watch out for 88 The rise of the online brokers 89 Free Share Dealing: What''s the Catch? 91 Recognising the basics to free share dealing 91 Understanding costs 93 Being aware of international costs 94 Choosing a Broker 94 Discovering Various Types of Brokerage Accounts 95 Cash accounts 96 Nominee accounts 96 Judging Brokers'' Recommendations 97 Clarifying the recommendations 97 Asking questions 98 Robo Advisers: Letting the Machine Carry the Load 99 Identifying what makes them so attractive 100 Choosing between robos 101 Chapter 8: Investing for Growth 103 Becoming a Value-Orientated Growth Investor 104 Getting Tips for Choosing Growth Shares 105 Making the right comparison 105 Checking out a company''s fundamentals 106 Looking for leaders and megatrends 106 Considering a company with a strong niche 107 Noticing who''s buying and/or recommending the share 107 Looking to history for investing lessons 108 Evaluating the management of a company 109 Exploring Small-Caps and Speculative Shares 111 Avoiding new issues, unless 113 Asking yourself if your small-cap''s making money 113 Recognising that investing in small-cap shares requires analysis 114 Chapter 9: Investing for Income 115 Understanding Income Shares 116 Advantages of income shares 116 Disadvantages of income shares 117 Analysing Income Shares 119 Understanding your needs first 119 Checking out yield 120 Checking the company''s dividend cover 123 Diversifying your shares 123 Examining the company''s bond rating 124 Exploring Typical Income Shares 125 Utilities 125 Real estate investment trusts (REITs) 126 Chapter 10: Using Basic Accounting to Choose Winning Shares 129 Recognising Value When You See It 130 Inspecting a company from a value-oriented viewpoint 130 Understanding different types of value 131 Putting the pieces together 133 Accounting for Value 133 Walking on a wire: The balance sheet 134 Looking at the P&L account 137 Playing around with ratios 140 Part 3: Picking Winners 145 Chapter 11: Decoding Company Documents 147 Slices from the Big Cheese: The Annual Report 148 Analysing the annual report''s anatomy 148 Going through the proxy materials 152 Getting a Second Opinion 153 Company documents filed with the RNS 153 Brokerage reports: The good, the bad and the ugly 155 Paid-for research 156 Compiling Your Own Research Department 157 Chapter 12: Analysing Industries 159 Interrogating the Industries 160 Is the industry growing? 160 Are the industry''s products or services in demand? 161 What does the industry''s growth rely on? 162 Is this industry dependent on another industry? 162 Who are the leading companies in the industry? 163 Is the industry a target of government action? 163 Which category does the industry fall into? 164 Outlining Key Industries 165 For sale 166 Baby, you can drive my car 167 Thanking Mr Roboto 167 Banking on it 168 Chapter 13: Being Prepared for a Changing World 169 Charging at Bullish Opportunities 170 Globalisation and the need for commodities 171 The energy transition 171 Inflation hedges 173 The coming healthcare revolution 174 An aging society 175 Hugging Tight with a Bearish Outlook 176 Central banks and monetary policy 176 Cyclical shares 178 Discussing Important Info for Bulls and Bears 179 Conservative and bullish 179 Aggressive and bullish 180 Conservative and bearish 180 Aggressive and bearish 180 Diversification 180 Chapter 14: Getting Active and Alternative with Investment Funds 181 Understanding Investment Trusts 182 Exploring the Rise of Alternatives and Investment Trusts 184 Recognising the main categories of alternatives 185 Playing the discount game 186 Examining the infrastructure boom 187 Investing in property 190 Protecting inflation 191 Investing for an income 192 Deciding Whether Investment Trusts and Index Trackers Are Right for You 193 Proper, real alternatives 194 Royalty funds 194 Crypto cometh 195 Emotional assets 195 Hedge funds 196 Investigating the Rise of Crowdfunding 196 Part 4: Investment Strategies and Tactics 199 Chapter 15: Taking the Bull (or Bear) by the Horns 201 Bulling Up 202 Recognising the beast 202 Avoiding the horns of a bull market 204 Toro! Approaching a bull market 204 Bearing Down 206 Identifying the beast 207 Heading into the woods: Approaching a bear market 209 Straddling Bear and Bull: Uncertain Markets 211 Pinpointing uncertainty is tough 211 Deciding whether you want to approach an uncertain market 212 Chapter 16: Choosing a Strategy That''s Just Right for You 213 Laying Out Your Plans 213 Living the bachelor life: Young, single, with no dependents 214 Going together like a horse and carriage: Married with children 215 Getting ready for retirement: Older than 40 and single or marr.