The Motley Fool Money Guide
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7700++ DDVVDD’’ss FFOORR SSAALLEE && EEXXCCHHAANNGGEE www.traders-software.com www.forex-warez.com www.trading-software-collection.com www.tradestation-download-free.com Contacts [email protected] [email protected] Skype: andreybbrv Published by The Motley Fool, Inc., 123 North Pitt Street, Alexandria, Virginia, 22314, USA First Printing, February 2001 10 9 8 7 6 5 4 3 2 1 This publication contains the opinions and ideas of its authors and is designed to provide useful information in regard to the subject matter covered. It is sold with the understanding that the author and publisher are not engaged in rendering legal, financial, tax preparation, or other pro- fessional services. Laws vary from state to state, and if the reader requires expert assistance or legal advice, a competent professional should be consulted. Readers should not rely on this (or any other) publication for financial guidance, but should do their own homework and make their decisions. The author and publisher reserve the right to be stupid, wrong, or even foolish (with a small “f”). Remember, past results are not necessarily an indication of future performance. The author and publisher specifically disclaim any responsibility for any liability, loss, or risk, per- sonal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and ap- plication of any of the contents of this book. Copyright © 2001 The Motley Fool, Inc. All rights reserved. The Motley Fool and the “Fool” logo are registered trademarks and “Fool” is a trademark of The Motley Fool, Inc. ISBN 1-892547-11-2 Printed in the United States of America Body set in Apollo MT 11.5/13.5. Questions set in Syntax Med 13/13.5. Titling set in ITC Veljovic. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval sys- tem, without the prior written permission of The Motley Fool, Inc. Distributed by Publishers Group West Cover design by Johnson Design Interior Design & Production by Pneuma Books: Complete Publisher’s Services; (for info visit www.pneumadesign.com/books/info.htm) Printed by United Book Press, Inc. The Motley Fool The Motley Fool’s mission is to educate, amuse, and enrich. Begun as a newsletter serving 60 readers in August 1994, the Fool now reaches mil- lions of people every month as it plays host to a celebrated community of individuals dedicated to helping each other achieve financial security and independence. The Motley Fool’s products and services are available across a variety of media: on its website at Fool.com; via its four Simon & Schus- ter books, all New York Timesbestsellers; through its premium products, including online seminars, self-published books, and Motley Fool Research; through its syndicated weekly newspaper column, currently carried by more than 200 newspapers around the U.S.; via its daily “Market Minutes” and weekly “Motley Fool Radio Show,” both joint ventures with Cox Radio that can be heard on more than 150 stations nationwide; and on America Online (keyword: Fool). The Fool’s international website can be found at www.Fool.co.uk and on America Online (keyword: FoolUK). Become a Fool! Join the millions of people who call themselves Fools and are taking control of their financial destinies. When you become a Fool youÕll get: ¥Access to The Motley FoolÕs informative and acclaimed website, Fool.com •A wide variety of personal finance solutions and exciting invest- ment ideas •Foolish product discount alerts •Answers to all of your questions about money Get started on your journey to financial independence today by register- ing at www.welcome.Fool.com! iii About the Author Selena Maranjian is a senior writer at The Motley Fool. She lives in New Hampshire with her two dogs. (Whoops! Scratch that — that’s every other writer.) Armed with a Wharton MBA and a Masters in Teaching from Brown University, one of Selena’s missions in life is to render the incomprehensi- ble comprehensible. She writes the Fool’s nationally syndicated weekly newspaper feature and has also written Investment Clubs: How to Start and Run One the Motley Fool Way and co-written The Motley Fool Investment Tax Guide. iv Acknowledgments Few Foolish products are created alone. Foolishness is all about communi- ty — about people conversing and learning together, asking and answer- ing questions, sharing opinions, and making each other laugh. Even though I have an MBA, most of what I know about investing and personal finance was learned in Fooldom. Most of what you’ll read in this book also comes from Fooldom, directly or indirectly. I’m grateful to the many community members of the Fool who spend time on our discussion boards, sharing their wisdom. I’m also indebted to my many Fool colleagues, from whom I’ve learned much. I hesitate to name any names, but when it comes to personal finance and tax issues, Roy Lewis and Dave Braze are the ones who’ve most often made me look smart. Much of this book’s car buying and home buying information, as well as the glos- sary, is drawn from the work of Bill Barker, Paul Maghielse, and David Wolpe. The colleagues who’ve taught me about investing are too numerous to name. Many Fools worked hard helping make this book a reality, heroically read- ing and reviewing every page and making it a much better work than it otherwise would have been. I thank them most sincerely: Brian Bauer, Reg- gie Santiago-Bobala, Alissa Territo, Robyn Gearey, and Debora Tidwell. Thanks to Alicia Abell as well, for her guidance as the book was shaped. v For my family, who made me who I am, and my Fool colleagues, who always make me look good. Table of Contents FOREWORD by David Gardner............................................................................viii INTRODUCTION ..................................................................................................xi PART I — PERSONAL FINANCE ..........................................................................1 Chapter 1: Saving and Budgeting..........................................................................3 Chapter 2: Credit Cards and Debt ......................................................................13 Chapter 3: Insurance ..........................................................................................23 Chapter 4: Buying a Car ....................................................................................45 Chapter 5: Buying a Home..................................................................................61 Chapter 6: Paying for College ............................................................................85 Chapter 7: Banking Foolishly ..............................................................................95 Chapter 8: Living Below Your Means ................................................................107 Chapter 9: Taxes ................................................................................................121 Chapter 10: Retirement ......................................................................................139 Chapter 11: Divesting — Giving to Charity ..........................................................151 Chapter 12: Death, Funerals and Estate Planning................................................161 PART II — INVESTING ......................................................................................175 Chapter 13: The Basics........................................................................................177 Chapter 14: Wall Street’s Ways ..........................................................................209 Chapter 15: Understanding Stocks ....................................................................233 Chapter 16: Researching and Evaluating Companies ..........................................251 Chapter 17: Advanced Research Topics..............................................................299 Chapter 18: Buying and Selling Stocks ..............................................................309 Chapter 19: Mutual Funds ..................................................................................321 Chapter 20: Managing Your Portfolio ................................................................335 Chapter 21: How Businesses and the Economy Work ........................................351 Chapter 22: Un-Foolish Investing ........................................................................361 Chapter 23: Potpourri..........................................................................................371 PART III — APPENDICES..................................................................................387 Appendix A: Resources for More Information ....................................................389 Appendix B: Glossary ..........................................................................................393 Appendix C: Index ..............................................................................................403 vii Foreword by David Gardner Every year, The Motley Fool executes its own April Fool’s Day prank. We design each of the pranks in accordance with our public mission: to edu- cate, to amuse, and to enrich. That means the jokes themselves must not only be funny, but must also teach people to make better financial decisions. Our 1998 joke provided a perfect example. On our home page at Fool.com, as evening blended into early morning on April 1, 1998, we put up a pub- lic apology, front and center. “We’ve been telling