Getting Started in Stocks Summary
Because of the current coronavirus pandemic situation, we all have to work from home and keep social distancing from others, but at the same time it’s an excellent time to read books. I bought “Getting Started in Stocks” at least 10 years ago when I first started working in financial industry. At the time I didn’t have the patient to read this book, but recently I went through my pile of books to reread them.
I recommend this book to anyone who are beginner investors, if you want to learn terminology of financial market and basic investment knowledge, this is a great book for reference. I have to say this book is super easy for beginner to understand. After you read this book, you will be ready to read some more complicated books to enhance your understanding.
What I learned from this book, please see the summaries below:
- One of the most important things you can do as a new investor is to set investment goals. Because it helps you to determine what you are going to invest and how you build your portfolio. The first thing I would like to talk about is to assess your risk tolerance. Different people have different risk tolerance, some people are wired in a way that fluctuations in their portfolio’s market value lead to enormous levels of emotional misery. Understanding your emotion and risk tolerance is the starting point to build your investment portfolio.
After you determine your risk tolerance, the goal is to find the combination of the following objectives that make sense for your financial situation:- Capital Appreiation
- Current Income
- Capital Preservation
- Speculation
- Difference between fundamental and technical analysis. In details, the book described two different analysis and how to use each analysis for your investment purpose.
- Fundamental analysis is based on external events and influences, as well as financial statements and industry trends.
- Technical analysis is based on the idea to identify previous market patterns to examine and predict price movements in the financial markets, by using historical price charts and market statistics.
- Basics of Buying and Selling stocks. For those topics, this book introduced the basic terminology of stocks, trading and financial market. In order for a beginner to understand more complicated investment strategies, you need to understand the basic terms.
- Build your portfolio and invest in Mutual Funds. Diversification is the basic idea for build an investment portfolio and also based on your goals and investment objectives. For Mutual Funds, the most important takeaways from this book are the followings:
- Start with your goals and risk tolerance as we talked before
- Research the tracking records of the fund
- Pay attention to expense ratio
- Understand the fund manager’s philosophy and investment attitudes
- Stock derivatives. Warrants, Rights and Options were the ones introduced in this book. I think after you read the book, you should have enough knowledge to pass your series 7 exam, but it’s not enough for you to invest in those derivatives.
- Invest in international stocks. Especially at current situation, I think invest in international stocks is extremely risky. First we need to understand global stocks are different than international stocks. They are two different terminologies. Second, what you should be aware when we decide to invest in international stocks:
- Currency risk
- Political risk
- Security regulations are different than US
- Financial auditing system is different as well
Those are all my takeaways after I read this book. What did you learn from this book? How do you like this book? Please leave your comments below.
