Semantic Conception of Truth

'The most damaging half truth for savers is “performance matters more than expenses”. Read this book carefully and the financial services industry will have one fewer easy victim, but you will have a sound base for a lifetime of successful investment.'Martin White, Chair of UK Shareholders Association This is one of those great big books to buy and then tuck away for constant reference. It's a tour through everything from managing a portfolio to establishing a fair intrinsic value for a share. If it moves in the world of investing, it's probably here.'David Stevenson,'Adventurous Investor'in the Financial Times ‘Informative and easy to read, Glen Arnold has produced arguably the most comprehensive book there is today on stock market investing and one that unquestionably will give an edge to any retail investor. This is a must read for anyone serious about investing.'Simon Thompson, Companies Editor, Investors Chronicle AN UPDATED VERSION OF THE BESTSELLING INVESTING BOOK IN THE UK The Financial Times Guide to Investing is the definitive introduction to the art of successful stock market investing by debunking the myth that investing is only for the wealthy. Bestselling author Glen Arnold covers the basics of what investors do and why companies need them, through to the practicalities of buying and selling shares and how to make the most from your money. Learn how to understand different types of investment vehicles, pick the right companies and understand their accounts so you can compile and manage a sophisticated portfolio. The fourth edition of this investing classic has been thoroughly updated and will give you everything you need to choose your shares with skill and confidence. New for this edition: Updated insights into the inner workings of stock markets, new accounting rules and dangers to watch out for when looking for investment gems Recent Financial Times articles, and the latest statistics to illustrate and expand on case studies and examples Detailed updates of changes to tax rules and rates Front Cover 1 Half Title Page 2 Title Page 4 Copyright Page 5 Dedication Page 6 Contents 8 About the author 16 Acknowledgements 17 Publisher's acknowledgements 18 What's new in the fourth edition 22 Introduction 23 PART 1: Investment basics 26 1 What is investment? 28 Partnerships 28 Limited liability 29 Ordinary shares and extraordinary returns 30 Shareholder rights 31 A money-making machine 32 Dividends and retained earnings 33 What if I want to sell? 34 Primary and secondary markets 34 Bonds 35 Capital structure 36 Stocks and shares 37 Rights issues 37 Financial institutions 38 Be proud to be a capitalist 41 A note of warning - investment and speculation 42 2 The rewards of investment 44 Becoming a millionaire 44 Simple and compound interest 45 How well have investors fared in the past? 47 The importance of income 49 International comparison 53 What about risk? 53 Closing comment 55 3 Stock markets 57 What is a stock market? 57 Brokers and market makers 58 Pricing - good old supply and demand 59 A short history of the London Stock Exchange 60 ‘Big Bang’ 61 The international scene 63 Variety of securities traded 63 LSE's primary market 65 LSE's secondary market 67 The Main Market (The Official List) 67 The Alternative Investment Market 72 NEX Exchange 74 Who owns UK shares? 75 The role of stock exchanges 77 Useful websites 78 4 Buying and selling shares 80 Stockbroker services 81 Choosing a stockbroker 86 Finding prices and other information 88 Getting the most out of financial websites 90 Useful websites for discussion boards 94 What happens when I buy or sell shares? 104 An order-driven trading system 109 The trading system for less liquid shares - SETSqx 111 What happens after dealing? 112 Paying for your shares 116 Internet dealing 117 Direct market access 117 Transferring shares without brokers 118 Useful websites 119 PART 2: The investment spectrum 120 5 Pooled investments 122 Unit trusts 123 Useful websites 132 Open-ended investment companies 141 Exchange traded funds 141 Investment trusts (investment companies) 148 Useful websites for investment trusts 157 Investment platforms or supermarkets 157 Useful websites 160 With-profits policies 161 Insurance company bonds 163 Stock market-linked bonds 164 Money markets 165 Hedge funds 166 Bringing home the significance of high fees 168 6 Bonds 175 Gilts 176 Corporate bonds 182 Credit rating 186 Useful websites 188 High-yield (junk) bonds 188 Convertible bonds 189 Foreign bonds 190 Eurobonds 191 Peer-to-peer lending 193 7 Unusual share investment 195 Business angels (informal venture capitalists) 196 Useful websites 196 Crowdfunding 197 Useful websites 197 Venture capital and other private equity 198 Private equity categories 200 Overseas shares 203 Useful websites 206 8 Derivatives and options 209 What is a derivative? 209 What is an option? 210 Share options 211 Call option holders (call option buyers) 211 Call option writers 215 LIFFE share options 217 Put options 218 How to trade options 218 Using share options to reduce risk: hedging 219 Using options to reduce losses 219 Index options 220 Useful websites 227 9 Futures 228 Marking to market and margins 231 Settlement 233 Equity index futures 234 Buying and selling futures 235 10 Spread betting, contracts for difference and warrants 237 Spread betting 237 Money up-front 238 Useful websites 242 Contracts for difference 242 Warrants 244 Covered warrants 245 Useful websites 247 PART 3: Company analysis 248 11 Company accounts 250 Oh no, not numbers again! 252 How to obtain reports 253 The report and accounts 254 Profit and loss account 256 Balance sheet (statement of financial position) 261 Cash flow statement 265 Chairman's statement 269 Chief executive's review 270 Financial review 270 Directors' report and business review 270 Auditors' report 271 Five-year summary 272 Trading statements 273 Further reading 273 12 Key investment ratios and measures 274 From the financial pages 275 Performance ratios and measures 284 Financial health ratios and measures 291 Forward-looking measures 296 Further reading 302 13 Tricks of the accounting trade 303 Goodwill 306 Fair value 311 What was our revenue again? 314 Exceptional items 316 Stock (inventory) valuation 317 Depreciation 319 Capitalisation 321 Off-balance-sheet items 322 Share (stock) options 323 Missing the profits and assets in investee companies 324 Other tricks 325 Concluding comments 327 Further reading 329 14 Analysing industries 330 The competitive floor 330 The five competitive forces 331 Threat of entry 334 Intensity of rivalry of existing companies 337 The threat from substitutes 339 Buyer (customer) power 340 Supplier power 341 Industry evolution 342 Concluding comments 348 Further reading 348 15 The competitive position of the firm 349 The TRRACK system 351 What makes resources extraordinary? 360 Investment in resources 365 Leveraging resources and over-exploiting them 366 Concluding comments 367 Further reading 368 PART 4: Managing your portfolio 370 16 Companies issuing shares 372 New issues 372 Rights issues 381 Other equity issues 386 Scrip issues 388 Share buy-backs and special dividends 391 17 Taxation and investors 393 Stamp duty 393 Tax on dividends 394 Capital gains tax 394 Interest-bearing instruments 396 Inheritance tax 397 Individual savings accounts 397 Personal pensions 401 Enterprise Investment Scheme 405 Venture capital trusts 407 Tax-efficient charitable gifts 409 18 Mergers and takeovers 411 Merger motives 411 Financing mergers 416 The rules of the takeover game 420 Useful websites and further reading 428 Who wins from mergers? 429 Why do mergers fail? 430 Further reading 430 19 Investor protection 431 Wayward financial services professionals 431 Regulation of markets 438 Regulation of companies 440 Self-protection 441 Scams 442 20 Measuring performance: indices and risk 447 Indices 447 Risk 456 Useful websites and further reading 467 21 Investment clubs 468 How to set up a club 469 The unit valuation system 469 Bank account 470 Brokers 470 Tax 471 Glossary 472 Index 566 Back Cover 594 "The Financial Times Guide to Investing is the definitive introduction to the art of successful stock market investing by debunking the myth that investing is only for the wealthy. Bestselling author Glen Arnold covers the basics of what investors do and why companies need them, through to the practicalities of buying and selling shares and how to make the most from your money. Learn how to understand different types of investment vehicles, pick the right companies and understand their accounts so you can compile and manage a sophisticated portfolio. The fourth edition of this investing classic has been thoroughly updated and will give you everything you need to choose your shares with skill and confidence." -- Adapted from Amazon.com