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Investing online for dummies 5th edition - Sindell K.

Sindell K. Investing online for dummies 5th edition - Wiley publishing , 2005. - 409 p.
ISBN-10: 0-7645-8456-1
Download (direct link): investingonlinefordu2005.pdf
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Capital gains tax rate 35 percent 15 percent
Tax liability $10,500 $4,500
For more information about the tax consequences of selling your securities, see these Web sites:
InvestorGuide ( offers a quick tutorial about taxes and your investments. Discover the ins and outs of how to calculate the cost basis of your securities.
IRS Tax Tips for Capital Gains and Losses( article/0,,id=106799,00.html ) offers a brief account of how exemptions from capital gains are calculated and when you should pay taxes on capital gains. Additionally, find links to in-depth coverage of the capital gains rules for mutual fund distributions, investment income and expenses, and the sale of investments. ( cfm?story=capitalgains), as part of its Personal Finance section, offers a guide to assist you in estimating your capital gains liability. The guide also includes a Capital Gains Tax Estimator. Just plug in your gains and losses for the investments you sold last year to figure out the taxes you owe.
364 Part IV: The Part of Tens
Chapter 20
Ten Green Flags for Buying
In This Chapter
^ Buying low so that you can sell high ^ Checking out earnings forecasts
^ Watching for bargain stocks that are trading under book value ^ Selecting a P/E ratio strategy that works for you
^ore Americans own equities than ever before. According to the Securities Industry Association ( question11.html), a total of 84.3 million individuals owned equities (stocks) in early 2002 — about 49.5 percent of all American households, a total of 52.7 million households. This number is a big change from 1983, when only 42.4 million individuals owned equities. Despite all this popularity, equities have a serious drawback: They don’t offer the security of interest-bearing investments (market funds, CDs, and fixed-income securities).
Interest-bearing securities offer consistent returns. In contrast, stock price fluctuations just “happen.” Every stock investor can count on market increases and decreases. These fluctuations aren’t company-specific, but that fact doesn’t offer much comfort. Over time, stock investments tend to reward patient investors with good, inflation-beating returns that are greater than those of any other type of investment. For many individuals, investing is the only way to reach their financial goals.
Over the years, avid investors have developed many methods to help others decide which stocks to buy and when to purchase them. No hard-and-fast rules exist. The approach that’s best is the one that works for you. The following sections offer a collection of investor wisdom that can assist you in maximizing your personal wealth.
366 Part IV: The Part of Tens
Digging Out of a Recession with Dollar-Cost Averaging
Many investors have learned that markets can decline as fast as they can increase. Frequently, a recession causes these market turnarounds. The National Bureau of Economic Research (NBER), located at, defines a recession as two or more quarters of negative gross domestic product (GDP) growth. The NBER documents the beginning and ending of recessions. Many companies (such as automobile manufacturers) have business cycles that are closely related to the GDP. For companies that are linked to the GDP, a recession means a reduction in sales and earnings, which in turn affects the profits of individuals who have invested in these companies.
Understanding that the economy may be affecting the future performance of an investment candidate and factoring this information into your buying decision can be difficult. Ideally, you want to buy low and sell high. Some economic reports can assist you in predicting upturns. In other words, referring to these reports can help you get ready to buy. For example, if the consumer confidence survey ( shows an increase, the market may be improving; employment increases for two consecutive months ( may indicate an upturn; and the Census Bureau ( showing a consistent rise in capital-goods orders may be a predictor of a stronger market.
What if there are no clear indicators of the market moving upward or downward? In this situation, the dollar-cost averaging approach is the best way to get back into the game. The dollar-cost averaging approach is used when you regularly invest a fixed sum. When stocks are down, you buy more. When stocks are up, you buy less. Use your online broker, a direct purchase plan, a low-fee direct purchase plan (such as ShareBuilder), or buy no-load mutual funds (for example, from Charles Schwab), which may let you invest as little as $50 per month.
For a $4 monthly brokerage fee, ShareBuilder ( allows you to purchase the stocks you want and to automatically deduct the amount you select (it can be as little as $25) from your checking account.
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