The Financial Times Guide to Investingis the definitive introduction to the art of successful stock market investing. Beginning with the very basics of why companies need investors and explaining what investors do, Glen Arnold takes you through the practicalities of buying and selling shares. He describes different types of investment vehicles and advises you how you can be successful at picking companies, understanding their accounts, managing a sophisticated portfolio, measuring performance and risk and setting up an investment club. The second edition of this bestselling introduction to investing explains how the financial markets operate, shows you what you need to know to be successful and encourages you to follow and act on your own judgements. Thoroughly updated to help you invest with skill and confidence, new sections include: * Online investing, website information and tools including screenshots and virtual portfolios as well as computerised counterparty trading * Detailed updating of tax rates and legislation, increases in ISA allowances and revisions to capital gains tax * A jargon-busting glossary to help you understand words, phrases and investing concepts * Recent Financial Times articles and tables which illustrate and expand on case studies and examples * Up-to-date statistics on the returns you can expect on shares and bonds Investing can be profitable and fun and The Financial Times Guide to Investing 2nd edition, explains step-by-step both the essentials of investing as well as describing how the financial markets really work. It details the practicalities of investing, such as how to go about buying shares and describes the variety of financial securities you can buy, from bonds and unit trusts through to exchange traded funds. Exploding the myths that only the wealthy can afford to buy and sell shares and showing you why you can be just as successful trading on your own as you would be by employing a fund manager, this authoritative guide book will help you build a profitable personal financial portfolio. * What is investment * The rewards of investment * Understanding stock markets * Using the financial media * Buying and selling shares * Pooled investments * Investing in bonds * Futures and options * Financial spreadbetting * Analysing companies and industries * Mastering company reports and accounts * Key investment ratios and measures * Ticks of the accounting trade * Managing your portfolio * Mergers and takeovers * Taxation and investors * Measuring performance * Investor protection * Investment clubs

Table of Contents

Foreword What's new in the second edition Introduction PART I INVESTMENT BASICS Chapter 1 What is investment? Partnerships; Limited liability; Ordinary shares and extraordinary returns; Shareholder rights; A money-making machine; Dividends and retained earnings; What if I want to sell?; Primary and secondary markets; Bonds; Capital structure; Stocks and shares; Rights issues; Financial institutions; Be proud to be a capitalist!; A note of warning: investment and speculation Chapter 2 The rewards of investment Becoming a millionaire; Simple and compound interest; How well have investors fared in the past?; The importance of income; International comparison; Equities versus gilts; What about risk?; Closing comment; Further reading Chapter 3 Stock markets What is a stock market?; Brokers and market makers; Pricing -- good old supply and demand; A short history of the London Stock Exchange; 'Big Bang'; The international scene; Variety of securities traded; The primary market; The secondary market; The Main Market(The Official List); The Alternative Investment Market; techMARK and the other MARKs; PLUS; Other trading facilities; Who owns UK shares?; The role of stock exchanges; Useful websites Chapter 4 Buying and selling shares Stockbroker services; Choosing a stockbroker; Finding prices; Getting the most out of websites; What happens when I buy or sell shares?; An alternative mechanism; A third trading system; What happens after dealing?; Ways of paying for your shares; Internet dealing; Transferring shares without brokers; Further reading PART II THE INVESTMENT SPECTRUM Chapter 5 Pooled investments Unit trusts; Open-ended investment companies (OEICs); Exchange traded funds (ETFs); Investment trusts (investment companies); With-profits policies; Unit-linked policies; Insurance company bonds; Stock market-linked bonds; Money markets; Hedge funds; Fund supermarkets; Bringing home the significance of high fees Chapter 6 Bonds Gilts; Corporate bonds; Credit rating; High-yield (junk) bonds; Convertible bonds; Foreign bonds; Eurobonds Chapter 7 Unusual share investment Business angels; Venture capital and other private equity; Private equity categories; Overseas shares; Preference shares Chapter 8 Options What is a derivative?; What is an option?; Share options; Call option holders (call option buyers); Call option writers; An example of an option writing strategy; LIFFE share options; Put options; How to trade options; Using share options to reduce risk: hedging; Using options to reduce losses; Index options; Further reading; Websites Chapter 9 Futures Marking to market and margins; Settlement; Buying and selling futures; Universal stock futures (single stock futures) Chapter 10 Spread betting, contracts for difference and warrants Spread betting; Contracts for difference; Warrants; Covered warrants; Further reading; Websites PART III COMPANY ANALYSIS Chapter 11 Company accounts Oh no! Not numbers again!; How to obtain reports; The report and accounts; Profit and loss account; Balance sheet; Cash flow statement; Chairman's statement; Chief executive's review; Director's report and business review; Auditors' report; Five-year summary; Trading statement; Further reading Chapter 12 Key investment ratios and measures From the financial pages; Performance ratios and measures; Financial health ratios and measures; Forward-looking measures; Further reading Chapter 13 Some of the tricks of the accounting trade Goodwill; Fair value; What was our revenue again?; Exceptional items; Stock (inventory) valuation; Depreciation; Capitalisation; Off-balance-sheet items; Share (stock) options; Other tricks; Concluding comment; Further reading Chapter 14 Analysing industries The competitive floor; The five competitive forces; Threat of entry; Intensity of rivalry of existing companies; The threat from substitutes;Buyer (customer) power; Supplier power; Industry evolution; Concluding comments; Further reading Chapter 15 The competitive position of the firm The TRRACK system; What makes resources extraordinary?; Investment in resources; Leveraging resources and over-exploiting them; Concluding comments; Further reading PART IV MANAGING YOUR PORTFOLIO Chapter 16 Companies issuing shares. New issues; Rights issues; Other equity issues; Scrip issues; Share buy-backs and special dividends Chapter 17 Taxation and investors Stamp duty; Tax on dividends; Capital gains tax; Interest-bearing instruments; Inheritance tax, Individual savings accounts; Personal pensions; Enterprise Investment Scheme; Venture capital trusts; Offshore investment Chapter 18 Mergers and takeovers Merger motives; Financing mergers; The rules of the takeover game; Who wins from mergers?; Final comment: Why do mergers fail?; Further reading Chapter 19 Investor protection Protecting investors from wayward financial service professionals; Regulation of markets; Regulating of companies; Self-protection Chapter 20 Measuring performance: indices and risk Indices; Risk; Diversifiable risk; Websites; Further reading Chapter 21 Investment clubs How to set up a club; The unit valuation system; Bank account; Brokers; Tax; Further reading Glossary List of useful Internet addresses Index

Author Biography

Glen Arnold is a businessman, investor and a professor of finance at Salford University. He's the author of numerous finance and investing books including Corporate Financial Management, The Handbook of Corporate Finance and The Financial Times Guide to Value Investing, all published by Financial Times-Prentice Hall.