This book does not go into a great deal of depth into a few areas of investing that are quite complex and outside its scope: technical analysis, options and futures trading, day trading, hedge funds, currency trading, and derivatives can even be tough for professionals to excel in. Instead, I try here to cover the most essential areas of investing and give mention to other areas with the hope that you will learn more about other investing subjects separately if you wish to explore them in greater depth. The Handy Investing Answer Book will take you through a logical progression of questions and answers to provide you context, definitions, and explanations so that you may make better-informed investment decisions.
I hope you enjoy it.
—Paul A. Tucci
How long have people been investing?
In approximately 1700 B.C.E., the Code of Hammurabi, discovered in 1902, laid out a set of rules for investing. Babylon, an ancient city in what is now Iraq, was ruled by various kings; the sixth king, Hammurabi, ruled for nearly 43 years. Under Hammurabi, a set of codes were enacted that helped the king rule his people. Although many of the codes described basic laws and governance, some codes described rules involving investing, loans, and financial transactions. Some copies of the original codes predate the main codes, which were etched upon a large stone, by several decades.
What do the Hammurabi Codes describe?
Some of the codes or laws describe what happens if commercial deals are not paid, the transfer of property, loan repayment, rent/lease arrangements, interest on property, and contract laws, among many other subjects.
What other city-states helped contribute to modern-day investing?
There are many other places around the world and in different periods of time that shaped and formed modern-day investing. In the 1300s, the city-state of Venice was a major center for the clearing or exchanging of obligations held by one owner, and exchanging them with another owner. Venetians began to do what today’s modern brokers do: bringing buyers and sellers together in order to transact a financial obligation. These same Venetian traders even engaged in international finance by buying and selling obligations owned by various European governments.
Stock tickers like this one, invented by Edward Calahan in 1863, reported changes in stock prices by printing out long strips of paper. They were not replaced until computers came into more common use in the 1970s.
When was the stock ticker invented?
Although it was invented by Edward Calahan in 1863, it was unveiled in New York City in 1867. The stock ticker machine was later improved by Thomas Edison in 1869 and was widely used until the 1970s, when it was gradually replaced by computer terminals. The machines were able to communicate current prices of stocks, which previously had been handwritten, or expressed verbally, and could transmit and ultimately print the quotes at one character per second. The great significance of the invention of the ticker machine is that it enabled the dissemination of prices across a large audience. Stock prices could be known by buyers near real time, allowing the markets to become more efficient and competitive.
What is a “ticker symbol”?
A ticker symbol is a unique series of characters, as many as five characters long, that identifies the name of the investment actively traded on an exchange. For example, Google is known as GOOG on the National Association of Securities Dealers Automated Quotations (NASDAQ) exchange, and Ford is known as F on the New York Stock Exchange (NYSE).
Why were these machines called Stock Ticker Machines?
The machines were called ticker machines because of the distinctive ticking noise the machines made while printing the ticker symbol and brief information about the stock price, on thin paper called ticker tape.
Specifically, what do ticker symbols indicate?
When you see ticker symbols moving across a screen, they usually tell us several things. The abbreviated letters, of one to five characters in length, indicate on what exchange the stock is listed. Symbols that are from one to three characters represent companies listed on the New York Stock Exchange, while symbols that are four or five characters represent companies listed on the NASDAQ Exchange. What you often see after the stock symbol is a recent price, change in price, and, in some instances, the volume of shares traded. You still see ticker symbols today, and the above information floating across a television screen or monitor as you watch financial programming or peruse financial websites.
What are “dividends”?
Dividends are the distributions of profits or earnings of a company to shareholders of record. It is generally defined as a distribution of some of the company’s profit to a specific class of shareholders as determined by that company’s board of directors, and is usually issued on a per share basis. If you have more shares, you are paid more of the company’s earnings during the period set forth by the board of directors.
What is a “blue chip stock”?
A blue chip stock is a publicly traded company that is usually very large, may be distributing profits in the form of dividends for many years, is a leader in the sector in which it competes, has notable stability and growth, and has the ability to adapt to changing market conditions successfully.
Where did the term “blue chip stock” originate?
It is thought by many to be derived from gambling, specifically the card game “poker,” where in betting, the use of the blue-colored chips represents the most expensive chip at the table.
When did The Wall Street Journal begin to publish a Dow Jones Industrial Average?
The Wall Street Journal began publishing an average of the prices of stocks listed on the New York Stock Exchange in 1896.
What is the Dow Jones Industrial Average (the “Dow” or “DJIA”)?
The DJIA is a price-weighted average of thirty blue chip stocks traded on the New York Stock Exchange. It is often seen as a barometer of the health of the stock markets.
How important is the DJIA to the investment community?
The DJIA is widely regarded as the most important index to follow in the world. It broadly indicates stock prices and investor confidence.
Who picks which stocks are components of the Dow?
The editors of The Wall Street Journal decide which companies should be included in the Dow. They search for a balance of companies reflective of the U.S. economy as a whole.
Who created the DJIA?
Charles Dow created the Dow, picking 11 stocks, then increasing this number to 12 stocks before publishing the average in 1896 that made up the Dow.
How else do I use the Dow in order to analyze my portfolio?
You may use the Dow in order to compare the performance of your stocks, bonds, and mutual funds, and ask yourself whether you are outperforming or underperforming the Dow. It helps to see this comparison over different periods of time in order to assess the success of your investment choices.
What is the oldest company in the Dow?