Introduction 1 About This Book 2 Foolish Assumptions 3 Icons Used in This Book 3 Beyond the Book 4 Where to Go from Here 4 Part 1: The Essentials of Stock Investing 5 Chapter 1: Surveying the World of Stock Investing 7 Understanding the Basics 8 Preparing to Buy Stocks 9 Knowing How to Pick Winners 10 Recognizing stock value 10 Understanding how market capitalization affects stock value 11 Sharpening your investment skills 12 Chapter 2: Taking Stock of Your Financial Situation and Goals 15 Establishing a Starting Point by Preparing a Balance Sheet 16 Step 1: Have an emergency fund 17 Step 2: List your assets in decreasing order of liquidity 18 Step 3: List your liabilities 20 Step 4: Calculate your net worth 22 Step 5: Analyze your balance sheet 22 Funding Your Stock Program 24 Step 1: Tally up your income 26 Step 2: Add up your outgo 26 Step 3: Create a cash flow statement 27 Step 4: Analyze your cash flow 28 Another option: Finding investment money in tax savings 28 Setting Your Sights on Financial Goals 29 The Shape of Equities: Stocks, ETFs, and Mutual Funds 30 Mutual fund equities 31 Exchange-traded fund (ETF) equities 31 Canadians in Their 20s and 30s: Setting the Foundations 32 Determining the right allocation to stocks and other equities 33 Start off by investing in big picture themes 34 Your Tax-Free Savings Account (TFSA) as a tax-free stock investing account 35 Invest in your company registered pension or retirement savings plan 36 Canadians in Their 40s 36 Exploring common investment portfolio allocations to stocks 37 Taxes, company pensions, and Registered Retirement Savings Plans (RRSPs) 38 50+ Canadian Stock Investors 38 Revisiting your allocation to stocks 39 Taxes, registered pensions, and Registered Retirement Income Funds (RRIFs) 40 Chapter 3: Common Approaches to Stock Investing 41 Matching Stocks and Strategies with Your Goals 42 Investing for the Future 43 Focusing on the short term 43 Considering intermediate-term goals 45 Preparing for the long term 45 Investing for a Purpose 46 Making money quickly: Growth investing 46 Making money steadily: Income investing 47 Investing for Your Personal Style 49 Conservative investing 49 Aggressive investing 50 Chapter 4: Recognizing Risk and Volatility 51 Exploring Different Kinds of Risk 52 Financial risk 52 Interest rate risk 54 Market risk 57 Inflation risk 58 Liquidity risk 58 Foreign exchange risk 58 Tax risk 59 Political and governmental risks 59 Personal risks 60 Emotional risk 61 Getting the Scoop on Volatility 63 Minimizing Your Risk 64 Gaining knowledge 64 Staying out until you get a little practice 64 Putting your financial house in order 66 Diversifying your investments 66 Weighing Risk against Return 67 Chapter 5: Investing in Canadian Exchange-Traded Funds 69 Comparing Exchange-Traded Funds and Mutual Funds 70 The differences 70 The similarities 71 Choosing an Exchange-Traded Fund 72 Main types of ETFs 72 Bearish ETFs 76 Taking Note of Indexes 77 Part 2: Before You Jump In 81 Chapter 6: Gathering Information 83 Looking to Stock Exchanges for Answers 84 Grasping the Basics of Accounting and Economics 86 Accounting for taste and a whole lot more 86 Understanding how economics affects stocks 87 Staying on Top of Financial News 91 Figuring out what a company''s up to 92 Discovering what''s new with an industry 92 Knowing what''s happening with the economy 92 Seeing what politicians and government bureaucrats are doing 93 Checking for trends in society, culture, and entertainment 93 Reading and Understanding Stock Tables 94 52-week high 95 52-week low 95 Name and symbol 96 Dividend 96 Volume 96 Yield 98 P/E 98 Day last 99 Net change 99 Using News about Dividends 99 Looking at important dates 99 Understanding why certain dates matter 101 Evaluating or Ignoring Investment Tips 101 Chapter 7: Going for Brokers 103 Defining the Broker''s Role 103 Distinguishing between Full-Service and Discount Brokers 105 At your disposal: Full-service brokers 105 Just the basics: Discount brokers 107 Choosing a Broker 109 Discovering Various Types of Brokerage Accounts 109 Cash accounts 110 Margin accounts 111 Option accounts 111 Judging Brokers'' Recommendations 112 Understanding basic recommendations 112 Asking a few important questions 113 Robo-advisors and Fintech 115 High tech meets equity investing 115 Terminating bad investment decisions with artificial intelligence 116 Advantages of an inhuman touch 116 What can go wrong with a short circuit? 117 Canadian Robo-advisors 119 Not just for Millennials 119 Asset allocation: What is the robo-advisor investing my money in? 120 What to watch for 121 Fees 122 Final thoughts 122 Chapter 8: Investing for Long-Term Growth 125 Becoming a Value-Oriented Growth Investor 126 Handy Growth Stock Tips 127 Look for leaders in megatrends 128 Compare company growth to industry growth 129 Consider a company with a strong niche 129 Check out a company''s fundamentals 130 Evaluate a company''s management 131 Notice who''s buying and/or recommending a company''s stock 133 Make sure a company continues to do well 135 Heed investing lessons from history 135 Exploring Small Caps and Speculative Stocks 136 Knowing when to avoid IPOs 136 Making sure a small cap stock is making money 137 Analyzing small cap stocks before investing 138 Chapter 9: Investing for Income 139 Understanding Income Stocks Basics 140 Getting a grip on dividends 140 Recognizing who''s well-suited for income 141 Advantages of income stocks 141 Disadvantages of income stocks 142 Analyzing Income Stocks 144 Pinpointing your needs first 144 Checking out yield 145 Looking at a stock''s payout ratio 147 Studying a company''s bond rating 148 Diversifying your stocks 149 Exploring Some Typical Income Stocks 149 Utilities 149 Real estate investment trusts (REITs) 150 Royalty trusts 152 Chapter 10: Understanding Technical Analysis 153 Comparing Technical Analysis and Fundamental Analysis 154 Under the hood of technical analysis 154 The good and bad of technical analysis 156 Combining the best of both worlds 157 Using the technician''s tools 158 Staying on Top of Trends 159 Distinguishing different trends 159 Looking at a trend''s length 160 Using trendlines 161 Watching for resistance and support 161 Getting the Scoop on Technical Charts 163 Checking out types of charts 163 Picking out chart patterns 164 Surveying Technical Indicators 167 The Relative Strength Index 168 Moving averages 168 Moving average convergence/divergence 170 Crossovers and divergence 170 Oscillators 171 Bollinger bands 171 Part 3: Picking Winners 173 Chapter 11: Using Accounting Basics to Choose Winning Stocks 175 Recognizing Value When You See It 176 Understanding different types of value 176 Putting the pieces together 178 Accounting for Value 180 Breaking down the balance sheet 180 Looking at the income statement 184 Tooling around with ratios 189 Chapter 12: Decoding Company Documents 195 Reading Annual Reports 196 Analyzing the annual report''s anatomy 197 Going through the proxy materials 200 Dig Deeper: Getting a Second Opinion 201 SEDAR, SEDI, and the SEC 201 Value Line 204 Standard & Poor''s 204 Moody''s Investment Service 205 Brokerage reports 205 Doing Your Own Research 207 Chapter 13: Sectors, Small Caps, and the Marijuana Space 209 Telling the Difference between a Sector and an Industry 210 Interrogating the Sectors and Industries 211 Which category is the industry fall in? 211 Is the sector growing? 212 Are the sector''s products or services in demand? 214 What does the industry''s growth rely on? 214 Is the industry dependent on another industry? 215 Who are the leading companies in the industry? 215 Is the industry a target of government action? 216 Outlining Traditional and Key Canadian Sectors and Industries 216 Resources and commodities 217 Moving in: Real estate 219 Banking on it: Financials 220 Exploring Small Caps and Speculative Stocks in Any Sector 221 The attractive potential of small cap stocks 221 Knowing when to avoid IPOs 222 Making sure a small cap stock is making money 223 Analyzing small cap stocks before you invest 223 Marijuana Stock Investing in Canada 224 Rules of the game 224 A.