Investing is about asking questions. What are you really buying? Does it have value? Is that value worth more, or less than the price you pay?
To answer these questions you need to look beyond share price. How much equity do shareholders own today? How much is the company earning? What are their profit margins? What variables influence their costs? How much equity is tangible? What’s the cash flow? Is that dividend sustainable? What’s the value for shareholders in the future?
Few investors take the time to understand what they are buying or selling; to ask the important questions. Failing to look beyond share price, they find themselves at the mercy of the short term market, ready to sell almost immediately after they buy.
Principles of Investing delivers a clear and rational introduction to investing in the stock market, with an emphasis on financial comprehension and the importance of understanding risk. This approach highlights the difference between price and value, and familiarizes the reader with the basic framework to begin making investment decisions. Recommended as a supplement to a basic course in financial analysis, but suitable as a primer or reference for the novice to intermediate investor, this book was written to provide transparency into the world of stocks and investing.
What is the stock market, and why is it important?
Why are shares issued, and what do they really represent?
What's the difference between share price and share value?
How do you read the three principle financial statements, and what should you look for?
What is tangible book value, and what does it mean to you?
What’s the difference between income and cash flow?
What’s the difference between a mutual fund and an ETF?
What are the different types of buy and sell orders, and which ones should you use?