Suggestions for a basic book on stock market and investments?

[calysmeow]

I found Piggington some months ago, and it saved me (IMO) when we moved here from buying into a home in San Diego at the wrong time. For now, my profits from the sale of my home out of state are in CD’s, and I am renting a home. So, thank you to all on this forum that opened my eyes.

Now, as I continue to read the forum, I have concerns about some employee stock options that I have, and timing the sale of those options, before the stock market takes a dive and I lose what profit there currently is. As such, I am trying to learn all I can to make an informed decision. There are many terms used in forums and blogs that I am not familiar with, and would appreciate suggestions for a good book to get to learn about the stock market, investing, stock options, etc. There are so many books out there that any suggestions would save me much money and time in reading only the best.

Appreciate the help!

[what_a_disasta]

My advice to you is that if you need a ‘basic book’ on the subject then you might as well stay out of it, or let some pro’s handle your money. It is a very complicated and risky business; trying to outsmart the street.

A good site for investment jargon is http://www.investopedia.com this explains terms that you will hear investors using.

Just keep your money in a high yield savings account or if you feel lucky, get some kind of index tracker etf like SPY.

If you are in the money, and able to convert those share options to cash, I would sellif you aren’t confident about future gains. Lock in those profits and don’t get greedy.

Nobody can say what will happen in the markets or eeconomy for sure, but it sure feels to me like something big and nasty this way comes.

[bsrsharma]

Try http://n-b-r.stores.yahoo.net/bookx.html

This http://www.leftbusinessobserver.com/WSDownload.html is a polemical look at wall street; but it is free to download!

This is another free tutorial http://precision-info.com/lc/index.cgi?c=980872265

[sogon]

I wouldn’t recommend investing yourself, unless you are in it for the long haul. I prefer the technique of buying stocks for products which I use and like. If you like Apple computers, buy Apple stock. Other than that I would agree that you may as well just buy an ETF. And track the market. If you are looking for ways to hedge against economic downturn or other events which are discussed here, I would suggest holding your money in a saving account until you read not a simple book, but are able to get through 3 or 4 complex ones and fully understand the implications of your trading.

Wall street is basically a casino, so the only real question is how much are you willing to gamble with, and will you bet on yourself or on the house. Betting on the house would generally be considered prudent, basically buy and hold, for the long run.

If you think the market is likely to decline in the near term, I would recommend looking into other investments other than the stock market, don’t “short” or buy inverse funds. Check out gold or stable foreign currencies, there are ETFs which you can purchase for either and are probably much safer than a short, as they are not inversely correlated to the US stock market, but may continue to gain regardless of the state of the stock market.

Investing does not have to be “the stock market”, I urge you to explore alternate investments that are much easier to understand for the novice investor. I would look for a book who teaches how to attain your goals, rather than perform technical feats.

Regardless of the state of the market, sell you options as soon as they are profitable. It is generally considered a bad idea to own the stock of the company for which you work. Think worldcom, enron, you might lose your job and all of your investments at the same time.

[HLS]

“I prefer the technique of buying stocks for products which I use and like. If you like Apple computers, buy Apple stock”

IMO, THAT has got be the worst advice in the world.
Sadly, I’ve heard it before.

[Critter]

Agreed. Just because the company “has a good story” doesn’t mean the business fundamentals are in place.

Along the same lines, buying only because you’ve heard good things about the company or read about them in the local paper. I know a few people that bought Qualcomm because they were a success story at the time and getting good press (and cocktail party buzz) but these people later sold their shares at a loss.

Usually by the time these kinds of stories get filtered down to the “rank and file” level, they are no longer a good deal.

Familiarity might be a starting point, but it doesn’t preclude doing your homework.

[calysmeow]

Thank you all for your concern and advise. I have no plans to touch the money from the sale of my house – it is in CD’s probably until I am able to purchase when housing reaches a price I consider affordable (2yrs? 5 yrs? who knows?).

Just want to learn more about the stock market and investing. I have seen suggestions on Piggington before of books that are recommended for the novice to expand our knowledge, but didn’t make note of them at the time. I am extremely conservative, and analytical, so my desire to learn is for my knowledge and comfort, not to become a trader on my own.

I have looked as some of the links above, and have found answers to some of my questions already. Thanks again.

[stansd]

I’ll take a stab at your question on stock options since I am in a similar situation. I have some fairly deep in the money options that don’t expire until 2012. It’s a solid fortune 500 company, as likely as any to effectively weather a downturn, but also one heavily dependent on consumer spending and business investment.

Here are the considerations most at the fore of my mind (others can chime in with others):

1. Excercising the options triggers an immediate tax at ordinary rates.

2. The difference between the excercise price and zero is effectively free exposure to the market for you. In my case, I have exposure to about 150K in market capitalization. If the stock goes up 10%, I make 15K. If I sell, however, after taxes, I’m left with somewhere around 50K, which then gets taxed, leaving me with 40K or less. If I put the 40K in an account earning 5%/year or so, I make 2K/year. The stock only has to average 2% over the four years until expiry to make it a better deal to hold it. I’ve done a whole sensitivity analysis on this, and if the stock averages a 2-3% gain over 4-5 years, in my situation, I’m better off holding. If somehow that gain goes to 10%/year, I’ve made an extra 60K or so.

3. You can, theoretically protect that downside by buying puts on the stock (there could be tax implications here-not sure-and given your experience, I wouldn’t dabble here without professional help)

4. Unless the options are deep in the money, you should probably hold them. Your downside is limited to the amount they are currently in the money, but your upside is theoretically limitless.

There are a number of other considerations, but those are the biggies in my mind.

What am I doing? I’m 60% sure that the market will take a dive, but I’m not 100%. If the stock performs well below average, I am still better off holding. I’ve also considered how I’d feel if I lost my entire 50K, and for now, the potential upside is worth a roll of the dice (I have conservatized my portfolio in other areas so that my overall exposure is reasonable).

If your options expire in the next 2 years or so and are deep in the money, I’d be quick to excercise (barring any positive insider knowledge of how the company will do). If they last longer than that, and if you could live with yourself if they became worthless, you might consider rolling the dice.

That’s my 2 cents,

Stan

[NeetaT]

Put all your money in a conservative asset allocation fund. You will eat 1% for the service, but you will be able to relax knowing that the fund manager more than likely has some skin in the game. Trying to outperform the fund managers is like trying to outperform any other professional in his or her own field. Just do it and relax. A basic investment book will probably tell you to do the same thing.

[NeetaT]

Put all your money in a conservative asset allocation fund. You will eat 1% for the service, but you will be able to relax knowing that the fund manager more than likely has some skin in the game. Trying to outperform the fund managers is like trying to outperform any other professional in his or her own field. Just do it and relax. A basic investment book will probably tell you to do the same thing.

[NeetaT]

Put all your money in a conservative asset allocation fund. You will eat 1% for the service, but you will be able to relax knowing that the fund manager more than likely has some skin in the game. Trying to outperform the fund managers is like trying to outperform any other professional in his or her own field. Just do it and relax. A basic investment book will probably tell you to do the same thing.

[NeetaT]

Put all your money in a conservative asset allocation fund. You will eat 1% for the service, but you will be able to relax knowing that the fund manager more than likely has some skin in the game. Trying to outperform the fund managers is like trying to outperform any other professional in his or her own field. Just do it and relax. A basic investment book will probably tell you to do the same thing.

[NeetaT]

Put all your money in a conservative asset allocation fund. You will eat 1% for the service, but you will be able to relax knowing that the fund manager more than likely has some skin in the game. Trying to outperform the fund managers is like trying to outperform any other professional in his or her own field. Just do it and relax. A basic investment book will probably tell you to do the same thing.

[jeeman]

“The Intelligent Investor” and “Security Analysis”. By the end of those books, you’ll be teaching me.

[jeeman]

“The Intelligent Investor” and “Security Analysis”. By the end of those books, you’ll be teaching me.

[Author]

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