Investing for Beginners: Most Popular Articles
The capitalist class represents the top 1 percent of wealth in the United States. By earning a living from their assets, the capitalist class is often able to enjoy life more and spend time with family, travel, and do the things about which most people dream. This ten part step-by-step guide will reveal why the capitalist class is different and how they got there.
How to get rich is a comprehensive collection of articles, resources, and guides on investing, building wealth, saving, and money management, all designed to help you with one goal: how to get rich.
How does an investor actually make money from buying stock? The return an investor makes comes from dividends and an increase in the price of the shares.
These nine financial keys will help you get on the road to financial freedom, build wealth, and become rich.
History has shown that owning stocks is one of the easiest and most profitable ways to grow your wealth over the long-term. Virtually every member of the Forbes 400 list got there because they own a large block of shares in a public or private corporation, ranging from manufacturing and oil drilling to cosmetics and money management. Although your beginning may be humble, this guide to investing in stocks will explain what stocks are, how you can make money from them, and much more.
Read a biography of Warren Buffett, including his education under Ben Graham before gaining control of Berkshire Hathaway.
Have you ever wondered how to invest in stock but just don't know where to begin? In this quick tutorial on how to invest in stock your investing for beginners guide will walk you through the basics and help you get a better understanding of what you need to do to get the process rolling.
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Working capital on the balance sheet is calculated by taking current assets and subtracting the current liabilities.
Here are some easy saving money tips for new investors who want to take some of the pain out of putting aside cash to build the funds available for investing.
Current liabilities on the balance sheet represent all of the liabilities or debts a company owes for the next twelve months to suppliers, vendors, banks, and other institutions. Current liabilities are an important part of measuring a company's liquidity position.
The seven rules of wealth building feature time tested keys to building wealth in your personal life while ensuring your time is spent on the things that really matter. This article is part of the wealth building series on the investing for beginners site.
Many people don't know what they should consider a good rate of return on their investments. What is a good rate of return on stock? What is a good rate of return on real estate? History can provide us some clues as to what might be considered reasonable expectations. This can help you avoid taking on more risk than you should.
Learning to read and analyze a balance sheet is important because it can help you understand the risk involved in a company. The balance sheet shows a company's debt level, net worth, and can help calculate important financial ratios.
401k loans and 401k hardship withdrawals are ways employees can access their retirement funds in the event of an emergency or a financial need. This article discusses the pros and cons of 401k loans and 401k hardship withdrawals. Page 3.
Everyone talks about stocks but few people understand them. This investing for beginners guide was put together so you could learn the 101 most frequently asked questions about stocks and the stock market in only a few minutes, putting you years ahead of the average American in understand what stocks are, how they work, and what some common terms mean.
Inventory turns and inventory turnover is one of the easiest financial ratios to calculate using information found on the income statement and balance sheet.
Stock trading is one of the basic activities of a new investor and most often involves online stock trading at discount brokers and brokerage firms. This beginner's guide to stock trading will walk you through the process of placing an order with your broker, choosing individual stocks, and expenses to consider such as commissions.
The key to success is something known as passive income which is money earned without much time or effort. In fact, passive income is even taxed differently than active income. This article discusses the type of passive income you can earn and which ones are best for those just getting into the idea of earning money from their investments.
When you begin investing for the first time, you are going to encounter something known as a holding company quite often. In fact, many of the most successful companies in the world are really holding companies. This basic introduction the holding company will explain what holding companies are, why you need to understand how they work, and some things to consider before investing in one.
Have you asked the question what is stock or wondered why shares of stock even exist? This guide will go far beyond answering the question.
This article explains in ten parts how to successfully pick good mutual funds. On this page we discuss why you should always buy no-load mutual funds.
Gross profit margin for an income statement can be calculated by dividing gross profit by total sales. The gros margin shows the percentage of revenue that is used in the production process.
According to research, only 10% of American millionaires inherited their money with the rest going out and earning it. How did they make money? In this article, we'll discuss the four ways to make money that serve as the foundation of nearly every fortune in the history of the world other than inheritance, theft, and other methods that simply aren't practical to the average person.
With the word derivative being thrown around every night on the news, you feel left out if you don't know what it means. Don't worry! In a few seconds, you're going to learn what a derivative is, the different types of derivatives, and why derivatives can be dangerous to the overall financial system if left unchecked.
Learn about this type of investor account that allows you to buy, sell, trade and hold stocks, bonds, mutual funds, and options.
Although both real estate and stocks offer substantial advantages, each come with their own risks. We examine these risks and discuss some of the other factors you may want to take into consideration when deciding on real estate vs. stocks.
The responsibility of a board of directors is to act as the shareholders' representative in all matters. A board of directors approves dividends, sanctions mergers, hires management and acts as a steward of shareholder capital.
How much money does it take to be rich? That is the question posed to a group of financial planners from a recent CNN Money resource. Most seemed to believe that it took between $2 million and $12 million to be rich and there reasons were compelling.
You can buy stock without a broker by taking advantage of direct stock purchase plans, dividend reinvestment plans, and other specialty accounts.
Discover some of the most remarkable secrets to freeing yourself from that special brand of anxiety that money troubles can elicit.
The primary purpose of the income statement is to report a company's earnings to investors. Income statement analysis can provide important insights into profit and expenses, operations, financial ratios and margins.
The straight line depreciation method is the simplest and most commonly used depreciation method. Straight line depreciation is calculated by spreading the cost of an asset out over its useful life.
One of the things that makes investing interesting and fun is the unexpected math quirks you can encounter when constructing a portfolio. For example, it is
The price-to-earnings ratio, or p/e ratio as it is often called, was made famous by value investor Benjamin Graham, who encouraged investors to use it as a defense tool against overpaying for stocks. The p/e ratio is a financial measurement of a company's current profit relative to the price you pay for each $1 of that profit. It is one of the most fundamental concepts in finance and investing. You need to know what it is, how to calculate the p/e ratio, and why it is important.
Saving money and investing money are not the same thing. Each has an important part to play in your family's financial life but very few new investors can explain the difference between the two.
Before you open a brokerage account, you need to learn the difference between a traditional and discount broker, the benefits and costs associated with each, and which one fits your style or personality.
As a new investor, what are the specific effects of inflation? Why should you be concerned about its spectre haunting the economy?
Mutual funds have made investing easier for millions of Americans. This article explains mutual fund basics, benefits, and selection.
The best way to understand the balance sheet is to see an actual real-world balance sheet and walk through it line by line. Here is a real example that we've taken from the Coca-Cola financial statements. It shows oyu assets, liabilities, and shareholder equity.
Investing lesson is an introduction to the stock market. The lesson aims to give a basic understanding of the market to new investors.
A company's board of directors declares a dividend and establishes a date of record (the ex-dividend date) and a payment date. The dividend can take several forms including cash, stock or property. This will walk you through the definition of the ex-dividend date, the dividend declaration date, and the dividend payment date. Page 2.
Mutual funds are one of the most popular ways for new investors to build wealth. Whether you own them through your retirement plan, such as a 401(k) or IRA, or you buy them directly or through a brokerage account, this guide to mutual fund investing was designed to help you understand what they are, how they work, and things you may want to consider.
Current assets on the balance sheet represent cash, cash equivalents, short-term investments, and other assets that can be quickly converted into cash, typically within a year or less.
Deciding whether to open a Roth IRA or Traditional IRA is a major decision with potentially large financial consequences. Both forms of the IRA are great ways to save for retirement, although each offers different advantages. This IRA FAQ lists the pros and cons of each type.
Balance sheets can be complicated but this table of contents will walk you through the understanding the balance sheet investing lesson.
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Have you ever asked yourself the question what is a hedge fund or wondered how they operate? In this basic introduction, we answer the question what is a hedge fund and help you learn how the hedge fund managers are paid, how their compensation is calculated, and why the term originally developed.
Revenue or sales is the amount of money a business brought in during the time period covered by the income statement. Many companies break revenue and sales sources up by division or segment.
For the new investor, there are four quick-and-dirty calculations that can be done to approximate when shares of a company are too expensive relative to earnings.
If you want to protect your savings accounts from bank failures, there are three main strategies you can use to minimize your risk of loss.
Shorting stock allows speculators to profit from falling stock prices. This article explains the basics of shorting stock, and considerations for those thinking about trying it out.
In ten simple steps, you can begin building a complete financial portfolio. The complete financial portfolio includes yoru 401k, brokerage accounts, house, car, student loans, credit card debt, and more.
Before you can begin to invest and build wealth for you and your family, you must destroy your credit card debt. If you have fallen behind, or are desperately treading water trying to avoid late payments, the massive interest charges and late penalties can quickly cause your balance to balloon, making it even more difficult, if not impossible, to make progress. One solution is a credit card debt settlement that allows you to pay a lump sum and get out of your debt entirely.
When analyzing a balance sheet, you will need a copy of a company's annual report, 10K, and 10q. These filings, sent into the SEC, provide you information on a company's health, management, and other information that's important to know as an investor.
When you invest in a small business, you have two choices of the type of position you want to take: You can make an equity investment or you can make a debt investment.
The broker and brokerage firm are the two primary relationships you will have when you begin your journey to investing, whether it's a stock broker, commodities broker, future broker, bond broker, or an all purpose brokerage firm. This broker guide for new investors explains some of the things you need to look for when selecting a brokerage firm, fees to watch out for, an explanation of asset management accounts, and more.
The best way learn how to read financial statements is to begin with a real income statement. Here, we start with the Microsoft Income Statement. We will work our way through it line by line until you understand financial statement analysis and how to calculate financial ratios.
Investing in real estate is a great way to grow your wealth if done responsibly, with conservative financing, and with an understanding of the tax implications. This beginner's guide is designed to point out all of the great real estate articles and resources we have available to you on the site.
Net profit margin is a financial ratio comparing a company's net profit after taxes to revenue. IF you want to know how to calculate the net profit margin, here are the numbers and formula you need.
Depreciation and amortization expense is recorded against earnings on the income statement in order to spread the initial purchase price of a fixed asset out over its useful life. Although depreciation expense requires no immediate cash outlay, it should not be added back to a company's profit.
New investors are often interested in purchasing a company's stock but don't know what to look for. Here are the four most important things you should require of each of your investments.
A company's capital structure is one of the most important decisions management has to make because it influences everything from the firm's risk profile to the financial ratios such as return on equity and interest coverage. In this resource, we examine why capital structure matters and the components that make up the capital structure of any company, no matter how large or small.
Return on Equity, ROE, tells investors how much profit a company relative to the total amount of shareholder equity on the balance sheet. A high return on equity, or ROE, means a business is more likely to generate cash internally. Return on equity is calculated by dividing net profit by average shareholder equity for the period.
Real estate capital gains taxes have some of the biggest loopholes and tax breaks for homeowners and other investors of any asset class including stocks, bonds, and mutual funds. This guide to real estate capital gains tax rates was designed to help you understand some of the rules that determine how much money you owe the IRS in taxes when you sell a home or other property.
One of the least understood secrets behind the success of Berkshire Hathaway and its rise from an $8 stock in the 1960’s to more than $118,000 per share today, is that Buffett focuses on two value “buckets” as he put it in a recent shareholder letter. The first bucket consists of the operating businesses in which the company holds a controlling stake and the second of marketable securities such as stocks, bonds, mutual funds, et cetera, most of which are held through the insurance subsidiaries.
Basic earnings per share (Basic EPS) is the profit a company made divided by the shares outstanding. Diluted earnings per share (diluted EPS) factor in possible share dilution from stock options, convertible warrants and preferred stock.
Retained earnings are the profits a company has reinvested in itself from past operations, which you can find in the shareholder equity section of the balance sheet.
Accounts receivables represents money owed to a business by its customers. The nature of accounts receivable and the portion they represent of current assets on the balance sheet depends upon the industry in which a company operates.
Saving for a home is hard enough. With the potential for investment losses lurking bheind every corner, where is the safest place to invest your down payment money? In this article, we address three or four of safest, most practical places to invest your down payment money so you can focus on affording the house you want - not recovering from investment losses.
The dividend guide teaches you how to invest in dividend stock, find high dividend shares, calculate the dividend yield, the dividend payout ratio, as well as determine just what a board of directors considers when setting the percentage of profits that are distributed instead of being reinvested. You'll also learn why reinvesting your dividends is so important to building wealth.
Inventory carried on the balance sheet consists of goods or merchandise a company has but may not yet have sold to customers. When managing inventories you should try to keep them as low as possible to increase profits and return on equity.
Simple interest and compound interest are very different. Understanding the difference is one of the keys to building wealth from your investments.
Negative working capital is possible for companies with high inventory turnover.
A chronological timeline of the life of Warren Buffett, Chairman and CEO of Berkshire Hathaway. Section 1 covers 1930-1956.
One of the biggest dangers to bond investors can be calculated by something called bond duration. It is a measure of interest rate risk and, if left unchecked, having a higher bond duration than is appropriate for your risk profile can result in huge losses, sometimes much higher than short-term stock fluctuations.
There are a few things that new investors can do to start on their journey to financial freedom, including establishing a Roth IRA and funding a 401k.
The current ratio can be calculated from the balance sheet as a test of a company's liquidity. To find this financial ratio ratio, you need to divide the current assets by current liabilities.
Compound interest, or compounding as it is sometimes called, is the process of earning interest on your interest. The nature of all investments is that they generate cash upon which you can live or they compound by you reinvesting your earnings, resulting in the compound interest cycle beginning. Let us show you some of the ways that you can help, or hurt, your compounded rate of return so you better understand how to harness the power of this investing principle.
Low cost index funds can be a great investment, providing superior returns to actively managed mutual funds over the long term.
Have you ever asked yourself the question - How much should I be saving? If you have, we've taken a detailed look at the questions you need to ask yourself before you can tackle that important question.
Many investors are not familiar with an investment bank and how it differs from the more traditional commercial bank.
There are many different types of real estate investments that most new investors don't think about when they begin to consider acquiring property. This brief list of the major categories of real estate investment used by professional investors was designed to help you think about potential areas you may have overlooked.
Learn eight ways to avoid the early withdrawal fee on your individual retirement account (IRA) in this article from Investing for Beginners.
What is a balance sheet? A balance sheet is the record of a company's assets and liabilities.
When investing your idle cash, money market accounts and certificates of deposit are two of the most popular choices.
In this special feature on income investing, youï¿½re going to develop a better understanding of income investing, which types of assets might be considered appropriate for someone who wanted to follow an income investing philosophy, and the most common dangers that can derail an otherwise successful income investing portfolio. At the very least, you will be armed with some things to consider before contacting a broker or money manager.
There are a number of benefits to investing in blue chip stocks, such as a history of rising dividends and growing profits.
Long term debt and the debt to equity ratio are important indications of the financial stability of a company that can be found on or calculated using the balance sheet.
The first $100,000 is the hardest and most difficult part of building your wealth. A few secrets can help making the first $100,000 far easier.
Return on equity, or ROE, is made up of three important components under the DuPont model. Discover how to calculate return on equity using these three components in this article to perform your own DuPont analysis.
Dollar cost averaging is the practice of investing or saving money at specific times, regardless of market conditions or your personal financial outlook. Dollar cost averaging is an effective investment strategy that is practiced by some of the best investors in the world.
Companies declare stock buy back programs to reduce the number of shares outstanding, effectively increasing the earnings per share. Investors should look for companies that have announced share buy back programs.
Long term investments and carrying values on the balance sheet are easy to understand. Both long term investments and long term assets represent assets owned by a company that may not be easily converted to cash but still have value.
Whether you are a new investor, a small business owner, or just working on your personal finances, you need to understand how to read financial statements.
In order to evaluate investment performance, you must learn to calculate total return and compound annual growth rate, or CAGR for short. Total return and CAGR will allow you to gauge your performance relative to the market, mutual funds and other investors. This article will teach you to calculate the two metrics and put them to work today.
This basic tutorial on stock trading provides twelve different types of stock trading orders investors can use to help manage their portfolio.
Gross profit on the income statement is the total revenue subtracted by the cost of generating that revenue, or cost of goods sold.
Operating expense consist of salaries paid to employees, research and development costs, and other charges that must be subtracted from revenue.
Accounting goodwill is the premium over book value a company pays during an acquisition. It goes on the balance sheet and is subject to periodic tests for goodwill impairment.
If you have ever asked yourself the question,
Operating income is a measurement of the money a company generated from its own operations, while operating margin is a financial ratio that tells you how much profit a business earns before taxes for every one dollar in sales.
At my business, Kennon Green Enterprises, we use a hierarchy of capital allocation that divides assets into six categories. These assets are then broken down into subcategories and used for each and everyone of our capital budgeting decisions - from office supplies to investments in marketable securities. This resource explains our capital allocation model, how we developed it, and examples of each type of asset.
Have you ever asked yourself, what is stock? A share of stock is nothing more than a piece of a business. If a company has 100 shares outstanding, 1 share would equal 1% (1 divided by 100 = 1%). If a company had 50 shares outstanding, 1 share would equal 2% (1 divided by 50 = 2%).
Minority Interest is found on the balance sheet under Liabilities. It is the value of the minority shareholders' holdings in a company's subsidiary or affiliate.
Shareholder equity is the difference between total assets and total liabilities on the balance sheet.
Making money in real estate and from real estate investing comes down to three sources: An increase in property values, rental income collected by leasing out properties to tenants, and profits generated from business activities.
What are blue chip stocks? Blue chip stocks are stocks that investors think are high quality and valuable due to strong dividends and balance sheets. Page 3.
If you want to start investing but have no idea where to begin, this step-by-step guide can help you understand the basics of building a portfolio.
This real estate investing guide was written for new investors who want to know how real estate investing can benefit them. It explains some of the things that are important when you start the process of acquiring properties such as rental houses, as well as the importance of different ownership structures such as limited liability companies. It is recommended for any new investor interested in real estate investing or owning property.
There are three categories of financial capital that are important for you to know when analyzing your business or a potential investment. They each have their own benefits and characteristics. They include equity capital, debt capital, and specialty capital.
This quick guide can help you figure out how long it will take for you to save $1 million based upon your age and the total amount of time you can keep your capital parked in good investments.
Return on Assets (sometimes abbreviated as ROA for short) tells an investor how much profit a company generated for each dollar of assets invested in the business.
The double declining balance depreciation method is an accelerated depreciation method that increases the amount of charges taken during the first few years. The double declining balance depreciation method can be helpful when comparing and analyzing an income statement.
Have you ever wondered what determines stock price? Find out about the trading process and how the market can fluctuate at a moment's notice.
To decide whether to pay off your debt or invest, you must consider the amount of return you expect on your investments, and the type of debt you currently have.
What is the difference between a stock and a bond? This question is often asked by new investors. Here's a simple answer to the question of what a stock is versus what a bond is. Page 2.
The Series EE savings bond is one of the most popular savings bonds in the history of the United States. Issued by the Treasury department, you can invest in Series EE savings bonds either by purchasing electronic versions or physical paper bond certificates. Depending upon your choice, the rules are different. Sit back and let us teach you everything you need to know about Series EE savings bonds in this great bond investing article.
As a new investor, do you actually know how to make money with mutual funds? Where your profit comes from when you invest in a mutual fund? This introduction explains the answer to those questions.
If you have a large portfolio, income, or net worth, there are five types of financial advisors you should consider adding to your life.
The 403(b) plan is a type of qualified retirement plan offered to employees of non-profits, educational institutions, and some self-employed ministers.
Thirteen years ago, I wrote an article on the site that detailed the world of shareholder perks. Back then, companies were fond of giving away free stuff to
One of the best personal finance strategies is to pay yourself first. By consistently setting aside a portion of your income for savings, retirement, or your investment account before you pay your bills, you will develop a financial cushion.
The second page of this article on the Board of Directors explains the perks of being a director, the interaction with the company's CEO, and the ways directors must react to ownership structure. Topics covered include directorship fees, stock option grants, additional compensation for each meeting attended, the Chairman of the Board, and evaluation of CEO performance. Page 2.
Treasury stock is listed under shareholder equity on the balance sheet. It represents the stock a company has issued and subsequently reacquired.
To calculate receivable turns, divide credit sales by the average receivables for the period.
The Rule of 72 is a financial trick that allows investors to project the rate of return they must earn in order to double their money over a given period of time.
IRA contribution limits vary by year and age. This article charts the maximum allowable contribution to your IRA each year.
There are four things that helped me begin making money early in my career. By following them, I hope that they can aid you in your own quest to become financially successful and make money for your family.
A Delaware LLC is a limited liability company incorporated in the state of Delaware. Many investors prefer a Delaware LLC because it offers privacy benefits, special tax benefits, and much more.
The Board of Directors is a group of people elected by the stockholders (the owners) to represent their interest. The board of directors is responsible for hiring the CEO, setting compensation policies, determining dividends, and evaluating performance. Page 9.
Social and economic class in the United States is often ranked based on household income and household wealth. In this special, we're going to discuss class in the United States, what causes those who reach the super-rich to get there, and where you and your family fall in the rankings. If you've ever wondered what it would take to be a member of the upper crust or if you just like observing social classes, this is a great read.
A stock broker is a licensed professional that buys and sells stocks, bonds, or mutual funds for you through a brokerage account. They charge you a commission, often less than $15 per trade. They just execute trades; they are not a financial planner. Page 4.
Market makers are banks and brokerages which stand by all hours of the trading day with a firm ask and bid price on a stock. They are compensated by the spread, which is the difference between the ask and bid price.
Prepaid expenses on the balance sheet represent a current asset because the company still has the right to receive the product or service for which it has paid.
Bonds are long term debt sold to investors by companies. The proceeds of the bond issue are used for many purposes, including operational expansion.
Investors cannot look at the share price by itself to determine the value of a stock. They must consider the relationship to earnings and net assets to share price. Stock splits can affect the actual price of shares.
Trust funds can be a great tool but they do have some major disadvantages that you should consider before using one.
The second part of this special article explaining the four ways to make money that serve as the source of virtually all legitimate income in the world describes a few ways in which different types of income are not equal. Page 2.
Warren Buffett has often told students and investors that they should act as if they have a punch card with only twenty slots and those are the only allocation decisions they can make in their entire life. This punch card has been quoted by famed investor Lou Simpson in helping to account for his success at GEICO.
Opening a Roth IRA for kids can be one of the best ways to help your children invest their money, saving cash tax-free to grow for decades as it generates dividends, interest income, and rental income.
Various formulas and calculations used to analyze a balance sheet including financial ratios such as receivable turnover and working capital per dollar of sales and current ratio and debt to equity ratio are important for investors attempting to understanding how well a business is performing.
Women can get rich through disciplined investing and saving, providing for their own retirement without the help of a man. This step-by-step investing tutorial will show you how women can begin the journey on the road to financial independence by starting an investing program.
Have you ever asked, what is a stock split? A stock split is a cosmetic increase in the number of shares outstanding, thereby reducing the total value of each share. Many investors incorrectly assume stock splits are a good thing.
A 10K is a filing that publicly traded companies are required, by law, to send into the SEC containing everything about their business that an investor would want to know before buying or selling shares of stock. These documents are available to the public for free. The best way to think about a 10K is to consider it a document that the government forces management to prepare for you, the owner, explaining the company’s finances, risks, opportunities, and current operations. I
Some investors prefer to hold shares of stock directly and not through a brokerage account. That way, they get their dividend checks directly, they don't have to worry about their broker going bankrupt, and they paid very low, or no, commissions. So no, you don't have to have a stock broker to invest in stock. Page 6.
Many people don't realize the opportunity cost associated with every financial decision. This article teaches you how to use the time value of money to determine the true economic opportunity cost of a course of action.
There are two major causes of a high inflation rate, which increases prices and can wreck havoc on the average investor's pocketbook and portfolio. Both are fairly easy to understand and in this article, I explain the twin sources that can lead to high inflation and economic misery.
One of the best uses of a limited liability company is as a vehicle for families to pool their money together to invest alongside one another. The benefits of a family pooling their money through a limited liability company to invest in everything from stocks, bonds, and real estate to mutual funds and start-up businesses come mostly from the power of an LLC operating agreement.
Saving and investing doesn't have to be hard. These five saving and investing tips will help make building wealth easier.