The Wall Street Journal Complete Money and Investing Guidebook 2011

Summary:

• The Wall Street Journal Complete Money and Investing Guidebook by Dave Kansas is a comprehensive guide to personal finance and investing. It covers topics such as budgeting, saving, retirement planning, taxes, insurance, investments, estate planning and more. The book provides readers with the tools they need to make informed decisions about their money and investments. It also offers advice on how to manage risk in order to maximize returns.

  The book begins with an overview of basic financial concepts such as budgeting and saving for retirement. It then moves on to discuss different types of investments including stocks, bonds, mutual funds and exchange-traded funds (ETFs). The author explains the risks associated with each type of investment so that readers can make educated decisions when it comes time to invest their money. He also discusses strategies for diversifying one’s portfolio in order to reduce risk while still achieving good returns.

  In addition to discussing various types of investments, the book also covers topics related to taxes such as deductions and credits available for investors. There is a section devoted entirely to estate planning which includes information on wills trusts probate laws inheritance tax rules etc..

  Finally the book contains several chapters dedicated solely towards helping readers understand how markets work what factors influence stock prices why certain stocks are better than others etc.. This section provides valuable insight into how professional investors think about markets which can be invaluable knowledge for any investor.

  Overall The Wall Street Journal Complete Money & Investing Guidebook by Dave Kansas is an excellent resource for anyone looking for guidance when it comes time managing their finances or making wise investment choices. With its clear explanations detailed examples helpful charts tables diagrams etc., this guidebook will help even novice investors become knowledgeable about personal finance matters.

Main ideas:

• #1.     Understand Your Investment Goals: It is important to understand your investment goals before you begin investing. This will help you determine the best strategies and investments for your individual needs.
  
  

  Understanding your investment goals is essential to making sound financial decisions. Before you begin investing, its important to take the time to consider what you want out of your investments and how much risk you are willing to take on. Your goals should be realistic and achievable, taking into account factors such as your age, income level, current savings and any other financial obligations.

  Once you have a clear understanding of your investment goals, it will be easier for you to decide which types of investments are best suited for achieving them. For example, if retirement planning is one of your primary objectives then stocks or mutual funds may be more appropriate than bonds or real estate. On the other hand, if short-term gains are more important then day trading might make sense.

  Its also important to understand that different types of investments come with varying levels of risk. Stocks tend to offer higher returns but also carry greater risks while bonds typically provide lower returns but with less volatility in their prices over time. Knowing this can help guide your decision-making process when selecting specific investments.

  Finally, remember that no matter what type of investment strategy you choose there will always be some degree of risk involved so it’s important not only to understand these risks but also develop an exit plan in case things dont go according to plan.

• #2.     Invest in Diversified Portfolios: Diversifying your investments is key to reducing risk and increasing returns. Investing in a variety of asset classes and sectors can help you achieve your goals.
  
  

  Investing in a diversified portfolio is one of the most important steps you can take to ensure your financial success. By investing in different asset classes and sectors, you are able to spread out your risk and increase the potential for higher returns. Investing in stocks, bonds, mutual funds, ETFs (exchange-traded funds), commodities, real estate investment trusts (REITs) and other investments can help you achieve your goals while minimizing risk.

  When building a diversified portfolio it’s important to consider both short-term and long-term objectives. Short-term investments may be more volatile but offer greater potential for growth over time. Longer term investments tend to be less risky but provide lower returns than their shorter term counterparts. It’s also important to consider how much money you have available for investing as well as what type of return on investment you expect from each asset class.

  It’s also wise to periodically review your portfolio and make adjustments when necessary based on changes in market conditions or personal circumstances. Rebalancing your portfolio regularly helps keep it aligned with your goals while reducing overall risk exposure.

• #3.     Understand the Different Types of Investments: Knowing the different types of investments available is essential for making informed decisions. This includes stocks, bonds, mutual funds, ETFs, and more.
  
  

  Investing can be a great way to grow your wealth, but its important to understand the different types of investments available. Stocks are one of the most common forms of investment and involve buying shares in publicly traded companies. Bonds are another popular form of investment that involves lending money to governments or corporations for a fixed period of time at an agreed-upon interest rate. Mutual funds allow investors to pool their money together and invest in a variety of stocks, bonds, and other securities. Exchange-traded funds (ETFs) are similar to mutual funds but trade on exchanges like stocks do.

  Real estate is also an option for investing, as it can provide steady income through rental payments or appreciation over time if you buy properties with potential for growth. Commodities such as gold, silver, oil, and agricultural products can also be bought and sold as investments. Finally, there are alternative investments such as hedge funds which use complex strategies involving derivatives and leverage.

  Its important to research each type of investment carefully before making any decisions so you know what risks may be involved and how they could affect your portfolio performance over time.

• #4.     Research Companies Before Investing: Researching companies before investing is important to ensure you are investing in a sound business. This includes looking at financial statements, management, and industry trends.
  
  

  Researching companies before investing is essential for any investor. It helps to ensure that you are making a sound investment decision and not putting your money into something that could potentially be a bad bet. When researching companies, it is important to look at their financial statements, management team, and industry trends. Financial statements provide insight into the company’s current financial health as well as its past performance. Examining the management team can give an indication of how well they have been able to lead the company in the past and what kind of strategies they may employ going forward. Finally, looking at industry trends can help investors understand where the sector is headed and whether or not there are potential opportunities for growth.

  It is also important to consider other factors such as competitive landscape, customer base, product offerings, pricing strategy etc., when researching companies before investing. All these elements will help investors gain a better understanding of how successful a business might be in the future and if it has potential for long-term success or profitability.

  Finally, research should include reading up on news articles about the company or sector so that you can stay informed about any changes or developments which may affect your investment decisions.

• #5.     Understand the Different Types of Risk: Risk is an inherent part of investing. Knowing the different types of risk and how to manage them is essential for successful investing.
  
  

  Risk is an inherent part of investing. It’s impossible to eliminate risk entirely, but understanding the different types of risk and how to manage them can help investors make more informed decisions about their investments. There are several types of risks that investors should be aware of when making investment decisions.

  The first type of risk is market risk, which refers to the possibility that a security or portfolio will lose value due to changes in the overall stock market. Market conditions such as economic recessions, political unrest, and natural disasters can all affect the performance of stocks and other securities. Investors must consider these factors when deciding whether or not to invest in a particular security.

  Another type of risk is credit risk, which occurs when a borrower fails to repay a loan or debt obligation on time. This type of risk affects both lenders and borrowers alike; if a borrower defaults on their loan payments, it could result in losses for both parties involved.

  In addition, there is also liquidity risk—the potential for an investor’s assets to become illiquid (unable to be sold quickly). Liquidity risks can arise from unexpected events such as corporate bankruptcies or sudden shifts in demand for certain products or services.

  Finally, there is also inflationary risk—the chance that prices will rise faster than expected over time due to increases in money supply. Inflationary risks can lead investors into buying assets at inflated prices with no guarantee they will appreciate over time.

  Understanding these different types of risks helps investors make better-informed decisions about where they put their money and how much they are willing to take on each kind of investment opportunity. By taking steps like diversifying portfolios across asset classes and monitoring markets closely for signs of trouble ahead, investors can reduce their exposure while still achieving long-term success with their investments.

• #6.     Utilize Tax-Advantaged Accounts: Tax-advantaged accounts such as 401(k)s and IRAs can help you save for retirement and reduce your tax burden.
  
  

  Utilizing tax-advantaged accounts is a great way to save for retirement and reduce your overall tax burden. 401(k)s and IRAs are two of the most popular types of these accounts, both offering unique benefits that can help you maximize your savings. With a 401(k), you can contribute pre-tax dollars from each paycheck, allowing you to lower your taxable income while still saving for retirement. An IRA allows you to make contributions with after-tax money, but offers the potential for tax deductions on those contributions when filing taxes.

  In addition to reducing your current taxable income or providing potential deductions in the future, these accounts also offer other advantages such as compound interest growth over time and protection from creditors in some cases. It’s important to understand all of the rules associated with each type of account before making any decisions about which one is right for you.

• #7.     Invest in Low-Cost Index Funds: Index funds are a great way to invest in the stock market without having to pick individual stocks. Low-cost index funds are a great way to maximize returns.
  
  

  Investing in low-cost index funds is a great way to get exposure to the stock market without having to pick individual stocks. Index funds are mutual funds that track an index, such as the S&P 500 or Dow Jones Industrial Average. By investing in these types of funds, you can gain access to hundreds of different companies with just one purchase. Low-cost index funds have lower fees than actively managed mutual funds and ETFs, which means more money stays in your pocket.

  Index fund investors benefit from diversification since they own a piece of many different companies at once. This helps reduce risk because if one company performs poorly it wont affect your entire portfolio as much as if you had invested solely in that companys stock. Additionally, since most index fund investments are passively managed there are no trading costs associated with buying and selling shares.

  Low-cost index funds also tend to outperform actively managed mutual funds over time due to their lower expenses and tax efficiency. Since they dont require active management, there is less turnover within the fund which reduces capital gains taxes for shareholders when distributions occur.

  Overall, investing in low-cost index funds is a great way for investors who want broad exposure to the stock market but don’t want to spend time researching individual stocks or pay high fees for active management.

• #8.     Utilize Dollar-Cost Averaging: Dollar-cost averaging is a great way to reduce risk and increase returns. This involves investing a fixed amount of money at regular intervals.
  
  

  Dollar-cost averaging is a great way to reduce risk and increase returns. This involves investing a fixed amount of money at regular intervals, regardless of the current market conditions. By doing this, you are able to buy more shares when prices are low and fewer shares when prices are high. Over time, this can help you build up your portfolio with less volatility than if you were to invest all your money in one lump sum.

  The key benefit of dollar-cost averaging is that it helps protect investors from making emotional decisions based on short-term market fluctuations. It also allows them to take advantage of lower share prices without having to guess which stocks will be undervalued or overvalued in the future. Additionally, by investing regularly over time, investors can benefit from compounding returns as their investments grow.

  To get started with dollar-cost averaging, decide how much money you want to invest each month and then set up an automatic transfer into your investment account so that it happens automatically every month. You should also consider diversifying your investments across different asset classes such as stocks, bonds and cash equivalents so that you have exposure to different types of investments.

• #9.     Understand the Different Types of Bonds: Bonds are a great way to diversify your portfolio and reduce risk. Knowing the different types of bonds and how they work is essential for successful investing.
  
  

  Bonds are a type of debt security that can be used to diversify your portfolio and reduce risk. They are issued by governments, corporations, and other entities in order to raise money for various projects or operations. When you purchase a bond, you are essentially lending money to the issuer in exchange for interest payments over time.

  The most common types of bonds include government bonds (Treasury bills, notes, and bonds), corporate bonds (issued by companies), municipal bonds (issued by cities or states), mortgage-backed securities (MBSs) backed by mortgages on real estate properties, asset-backed securities (ABSs) backed by assets such as auto loans or credit card receivables, zero coupon bonds which pay no interest but offer deep discounts when purchased at face value.

  Each type of bond has its own unique characteristics that investors should understand before investing. Government bonds tend to have lower yields than corporate or municipal ones due to their perceived safety; however they may also carry higher risks if the issuing country defaults on its debt obligations. Corporate and municipal bonds typically offer higher yields than government ones but come with greater default risk since they’re not backed up by any governmental entity.

  Mortgage-backed securities provide exposure to the housing market while asset-backed securities give investors access to different consumer loan markets. Zero coupon bonds don’t pay out regular interest payments like other types of fixed income investments do; instead they offer deep discounts when purchased at face value.

• #10.     Utilize Asset Allocation: Asset allocation is a great way to diversify your portfolio and reduce risk. This involves investing in a variety of asset classes and sectors.
  
  

  Asset allocation is a key component of any successful investment strategy. It involves diversifying your portfolio across different asset classes and sectors, such as stocks, bonds, real estate, commodities, and cash. This helps to reduce risk by spreading out your investments so that if one sector or asset class performs poorly, the other assets can help offset the losses.

  When it comes to asset allocation there are several factors to consider. First you need to decide what percentage of each type of asset you want in your portfolio. You should also think about how much risk you’re willing to take on and whether or not you have a long-term investing horizon. Additionally, it’s important to understand the correlation between different types of assets so that you can create an optimal mix for your individual needs.

  Once you have determined which assets make up your portfolio it’s important to regularly review them and rebalance when necessary. Rebalancing ensures that each portion of the portfolio remains within its target weighting range over time as market conditions change.

• #11.     Understand the Different Types of Mutual Funds: Mutual funds are a great way to diversify your portfolio and reduce risk. Knowing the different types of mutual funds and how they work is essential for successful investing.
  
  

  Mutual funds are a great way to diversify your portfolio and reduce risk. There are many different types of mutual funds, each with its own unique characteristics and investment objectives. It is important to understand the differences between these various types of funds in order to make informed decisions about which ones may be best for you.

  The most common type of mutual fund is an equity fund, which invests primarily in stocks. Equity funds can range from aggressive growth funds that focus on high-risk investments with the potential for large returns, to conservative income funds that invest mainly in dividend-paying stocks or bonds. Other popular types of mutual funds include bond and money market funds, index funds, sector or industry specific funds, balanced or asset allocation portfolios, international/global stock and bond portfolios.

  Each type of fund has its own set of risks and rewards associated with it. For example, while equity mutual fund investments have the potential for higher returns over time than other types of investments such as bonds or cash equivalents like money market accounts; they also carry more risk due to their exposure to stock market volatility.

  It is important to research any mutual fund before investing in it so you can understand how it works and what kind of return you can expect from it over time. You should also consider factors such as fees charged by the manager (expense ratio), past performance history (track record) as well as any tax implications associated with investing in a particular type of fund.

• #12.     Utilize Exchange-Traded Funds: Exchange-traded funds (ETFs) are a great way to diversify your portfolio and reduce risk. ETFs are similar to mutual funds but are traded on the stock exchange.
  
  

  Utilizing exchange-traded funds (ETFs) is a great way to diversify your portfolio and reduce risk. ETFs are similar to mutual funds, but they are traded on the stock exchange. This means that you can buy and sell them just like any other stock, allowing for more flexibility in terms of when you enter or exit positions. Additionally, ETFs often have lower fees than traditional mutual funds.

  ETFs offer investors access to a wide range of asset classes such as stocks, bonds, commodities and currencies. They also provide exposure to different sectors within each asset class which allows investors to tailor their portfolios according to their individual needs and goals. Furthermore, because ETFs track an index rather than being actively managed by a fund manager, they tend to be less expensive than traditional mutual funds.

  Overall, investing in ETFs is an excellent way for investors looking for diversification without having to pay high management fees associated with actively managed investments. With the right research and due diligence it’s possible for even novice investors to build well-diversified portfolios using low cost ETF products.

• #13.     Understand the Different Types of Options: Options are a great way to diversify your portfolio and reduce risk. Knowing the different types of options and how they work is essential for successful investing.
  
  

  Options are a great way to diversify your portfolio and reduce risk. Knowing the different types of options and how they work is essential for successful investing. There are two main types of options: calls and puts. A call option gives you the right, but not the obligation, to buy an asset at a predetermined price on or before a certain date in the future. A put option gives you the right, but not the obligation, to sell an asset at a predetermined price on or before a certain date in the future.

  When trading options, it’s important to understand that there are many different strategies available depending on your goals and objectives. For example, if you want to protect against downside risk while still having potential upside gains then buying protective puts may be appropriate for you. On the other hand, if you want more aggressive exposure with potentially higher returns then writing covered calls may be suitable.

  It’s also important to understand that when trading options there is always some degree of risk involved as well as potential rewards so it’s important to do your research beforehand and make sure that any strategy chosen fits within your overall investment plan.

• #14.     Utilize Margin Accounts: Margin accounts are a great way to leverage your investments and increase returns. However, they also come with a high degree of risk.
  
  

  A margin account is a type of brokerage account that allows investors to borrow money from their broker in order to purchase securities. This leverage can increase the potential returns on an investment, but it also increases the risk associated with it. When using a margin account, investors must be aware of the risks involved and understand how much they are willing to lose if things don’t go as planned.

  When investing with a margin account, you will need to maintain a minimum balance in your account at all times. This is known as the maintenance requirement and is typically set by your broker or financial institution. If you fail to meet this requirement, then your broker may sell some of your investments without prior notice in order to bring your balance back up above the required amount.

  Its important for investors who use margin accounts to monitor their positions closely and adjust them accordingly when needed. Margin accounts can be very beneficial when used correctly, but they can also lead to significant losses if not managed properly.

• #15.     Understand the Different Types of Derivatives: Derivatives are a great way to diversify your portfolio and reduce risk. Knowing the different types of derivatives and how they work is essential for successful investing.
  
  

  Derivatives are financial instruments that derive their value from an underlying asset. They can be used to hedge against risk, speculate on price movements, or generate income. Common types of derivatives include futures contracts, options, swaps and forwards.

  Futures contracts are agreements between two parties to buy or sell a specific asset at a predetermined price in the future. Options give the buyer the right but not the obligation to buy or sell an asset at a certain price within a specified time frame. Swaps involve exchanging one type of debt for another with different terms such as interest rate payments or currency exchange rates.

  Forwards are similar to futures but they’re customized contracts between two parties and traded over-the-counter rather than through exchanges like futures. These derivatives allow investors to gain exposure to assets without actually owning them.

  It’s important for investors to understand how these different types of derivatives work before investing in them so they can make informed decisions about their investments and manage risk appropriately.

• #16.     Utilize Real Estate Investment Trusts: Real estate investment trusts (REITs) are a great way to diversify your portfolio and reduce risk. REITs are similar to mutual funds but invest in real estate.
  
  

  Real estate investment trusts (REITs) are a great way to diversify your portfolio and reduce risk. REITs are similar to mutual funds but invest in real estate. They allow investors to purchase shares of a company that owns, operates, or finances income-producing real estate assets such as office buildings, shopping centers, apartments, hotels and more. By investing in REITs you can gain exposure to the real estate market without having to buy individual properties.

  REITs offer several advantages over other investments including higher yields than stocks or bonds; potential for capital appreciation; liquidity through trading on major exchanges; and professional management of the underlying properties. Additionally, many REITs pay out dividends which provide an additional source of income for investors.

  When considering whether or not to invest in REITs it is important to understand their risks as well as their rewards. As with any investment there is always the possibility of loss due to changes in economic conditions or tenant defaults. It is also important to note that some REITS may be subject to certain tax implications so it’s best practice for investors do research before investing.

• #17.     Understand the Different Types of Hedge Funds: Hedge funds are a great way to diversify your portfolio and reduce risk. Knowing the different types of hedge funds and how they work is essential for successful investing.
  
  

  Hedge funds are a type of investment vehicle that can be used to diversify portfolios and reduce risk. They are typically managed by professional investors who use sophisticated strategies to generate returns in both rising and falling markets. Hedge funds come in many different forms, each with its own unique set of characteristics.

  One common type of hedge fund is the long/short strategy, which involves taking both long positions (betting on stocks or other assets to increase in value) and short positions (betting on stocks or other assets to decrease in value). This allows the investor to benefit from market movements regardless of direction. Other types include global macro funds, which focus on large-scale economic trends; event-driven funds, which take advantage of corporate events such as mergers and acquisitions; arbitrage funds, which exploit pricing discrepancies between related securities; and distressed debt funds, which invest in companies facing financial distress.

  It’s important for investors to understand the different types of hedge funds before investing their money. Each type has its own risks and rewards associated with it so it’s important for investors to do their research before committing any capital.

• #18.     Utilize Commodities: Commodities are a great way to diversify your portfolio and reduce risk. Investing in commodities such as gold, silver, and oil can help you achieve your goals.
  
  

  Utilizing commodities is a great way to diversify your portfolio and reduce risk. Commodities such as gold, silver, and oil can provide investors with an opportunity to hedge against inflation or other economic downturns. Investing in these types of assets can help you achieve long-term financial goals while also providing some protection from market volatility.

  When investing in commodities, its important to understand the different factors that affect their prices. Supply and demand are two of the most influential forces on commodity prices; when supply is low relative to demand, prices tend to rise. Additionally, geopolitical events like wars or natural disasters can have a significant impact on commodity markets.

  Its also important for investors to be aware of the risks associated with investing in commodities. Prices can be volatile due to changes in supply and demand as well as external factors like weather conditions or political unrest. Additionally, there may be additional costs associated with trading certain commodities such as storage fees or brokerage commissions.

  Overall, utilizing commodities is a great way for investors looking for diversification and risk reduction strategies within their portfolios. By understanding how different factors influence commodity prices and being aware of potential risks involved with trading them, investors can make informed decisions about which ones they should invest in.

• #19.     Understand the Different Types of Currencies: Currencies are a great way to diversify your portfolio and reduce risk. Knowing the different types of currencies and how they work is essential for successful investing.
  
  

  There are three main types of currencies: fiat, commodity-backed, and crypto. Fiat currency is the most common type of currency in circulation today. It is issued by a government or central bank and backed only by the full faith and credit of that issuing authority. Examples include the U.S. dollar, euro, Japanese yen, British pound sterling, Swiss francs, Canadian dollars, Australian dollars and many others.

  Commodity-backed currencies are those that are tied to a physical asset such as gold or silver. These assets provide stability for these currencies since they can be exchanged for their underlying commodities at any time if needed. Examples include the Chinese yuan which is pegged to gold reserves held by China’s central bank.

  Cryptocurrencies are digital forms of money created using blockchain technology that allow users to securely transfer funds without relying on third parties like banks or governments. Bitcoin is one example of a cryptocurrency but there are hundreds more available today with new ones being developed all the time.

• #20.     Utilize Alternative Investments: Alternative investments are a great way to diversify your portfolio and reduce risk. This includes investments such as private equity, venture capital, and hedge funds.
  
  

  Alternative investments can be a great way to diversify your portfolio and reduce risk. These types of investments are not as widely known or understood as traditional stocks, bonds, and mutual funds, but they offer the potential for higher returns with lower volatility. Private equity is one type of alternative investment that involves investing in companies that are not publicly traded on stock exchanges. Venture capital is another form of alternative investment which involves investing in start-up businesses with high growth potential. Hedge funds are also an option for investors looking to diversify their portfolios; these funds use sophisticated strategies such as short selling and leverage to generate returns.

  Investing in alternative assets can help you achieve greater diversification than traditional investments alone, reducing overall portfolio risk while potentially increasing returns over time. However, it’s important to understand the risks associated with each type of asset before making any decisions about how much money you should allocate towards them. Additionally, many alternative investments require large minimum amounts of capital so it’s important to make sure you have enough liquidity available if needed.