Eric Tyson - Investing All-in-One For Dummies

You can find laws being proposed or enacted by the federal government through Congress’s search page ( www.congress.gov ). Also, some great organizations inform the public about tax laws and their impact, such as the National Taxpayers Union ( www.ntu.org ) and the Tax Foundation ( www.taxfoundation.org ).

As odd as it sounds, trends in society, popular culture, and entertainment affect your investments, directly or indirectly. For example, when you see a headline such as “There are now more millennials than Baby Boomers,” you should find out what their buying habits are, what products and services they favor, and so on. Understanding the basics of demographic shifts can give you some important insights that can help you make wiser long-term choices in your stock portfolio. With that particular headline, you know that companies that are well positioned to cater to that growing market’s wants and needs will do well — meaning a successful stock pick for you.

Keep your eyes open to emerging trends in society at large by reading and viewing the media that cover such matters ( Time magazine, CNN, and so on). What trends are evident now? Can you anticipate the wants and needs of tomorrow’s society? Being alert, staying a step ahead of the public, and choosing stocks appropriately gives you a profitable edge over other investors. If you own stock in a solid company with growing sales and earnings, other investors eventually notice. As more investors buy up your company’s stock, you’re rewarded as the stock price increases.

The stock tables in major business publications such as the Wall Street Journal and Investor’s Business Daily are loaded with information that can help you become a savvy investor — if you know how to interpret them. You need the information in the stock tables for more than selecting promising investment opportunities. You also need to consult the tables after you invest to monitor how your stocks are doing.

Looking at the stock tables without knowing what you’re looking for or why you’re looking is the equivalent of reading War and Peace backwards through a kaleidoscope — nothing makes sense. But this section can help you make sense of it all (well, at least the stock tables!). Table 1-1shows a sample stock table. Each item gives you some clues about the current state of affairs for that particular company. The sections that follow describe each column to help you understand what you’re looking at.

TABLE 1-1A Sample Stock Table

Every newspaper’s financial tables are a little different, but they give you basically the same information. Updated daily, these tables aren’t the place to start your search for a good stock; they’re usually where your search ends. The stock tables are the place to look when you own a stock or know what you want to buy, and you’re just checking to see the most recent price.

The column in Table 1-1labeled “52-Wk High” gives you the highest price that particular stock has reached in the most recent 52-week period. Knowing this price lets you gauge where the stock is now versus where it has been recently. SkyHighCorp’s (SHC) stock has been as high as $21.50, whereas its last (most recent) price is $21.25, the number listed in the “Day Last” column. (Flip to the later section “ Day last” for more on understanding this information.) SkyHighCorp’s stock is trading very high right now because it’s hovering right near its overall 52-week high figure.

Now, take a look at DoinBadlyCorp’s (DBC) stock price. It seems to have tumbled big time. Its stock price has had a high in the past 52 weeks of $83, but it’s currently trading at $33.50. Something just doesn’t seem right here. During the past 52 weeks, DBC’s stock price has fallen dramatically. If you’re thinking about investing in DBC, find out why the stock price has fallen. If the company is strong, it may be a good opportunity to buy stock at a lower price. If the company is having tough times, avoid it. In any case, research the firm and find out why its stock has declined. ( Chapter 4in Book 3 provides the basics of researching companies.)

The column labeled “52-Wk Low” gives you the lowest price that particular stock reached in the most recent 52-week period. Again, this information is crucial to your ability to analyze stock over a period of time. Look at DBC in Table 1-1, and you can see that its current trading price of $33.50 in the “Day Last” column is close to its 52-week low of $33.

Keep in mind that the high and low prices just give you a range of how far that particular stock’s price has moved within the past 52 weeks. They can alert you that a stock has problems or tell you that a stock’s price has fallen enough to make it a bargain. Simply reading the “52-Wk High” and “52-Wk Low” columns isn’t enough to determine which of those two scenarios is happening. They basically tell you to get more information before you commit your money.

The “Name (Symbol)” column is the simplest in Table 1-1. It tells you the company name (usually abbreviated) and the stock symbol assigned to the company.

When you have your eye on a stock for potential purchase, get familiar with its symbol. Knowing the symbol makes it easier for you to find your stock in the financial tables, which lists stocks in alphabetical order by the company’s name (or symbol depending on the source). Stock symbols are the language of stock investing, and you need to use them in all stock communications, from getting a stock quote at your broker’s office to buying stock over the internet.

Dividends (shown under the “Div” column in Table 1-1) are basically payments to owners (stockholders). If a company pays a dividend, it’s shown in the dividend column. The amount you see is the annual dividend quoted for one share of that stock. If you look at LowDownInc (LDI) in Table 1-1, you can see that you get $2.35 as an annual dividend for each share of stock that you own. Companies usually pay the dividend in quarterly amounts. If you own 100 shares of LDI, the company pays you a quarterly dividend of $58.75 ($235 total per year). A healthy company strives to maintain or upgrade the dividend for stockholders from year to year. (Additional dividend details are discussed later in this chapter.)