Introduction

During the financial crisis of 2008, things got scary. Large Wall Street firms were going under, stock prices were plummeting, and layoffs and unemployment rates were soaring. And, all this was happening in the midst of the 2008 presidential election. Talk of another Great Depression was in the air. In fact, polls showed a majority of Americans feared another depression was actually happening. Housing prices were dropping sharply in most communities, and more and more properties were ending up in foreclosure.

Investing didn’t seem so fun anymore. However, despite the fact that the downturn was the worst in decades, it had similarities to prior downturns, and those who kept their perspective and their cash ready were able to invest at attractive prices.

The best investment vehicles for building wealth — stocks, real estate, and small business — haven’t changed. But, you still need money to play in the investment world. Like the first edition of Investing For Dummies, the sixth edition of this national best-seller includes complete coverage of these wealth-building investments as well as other common investments, such as bonds. Here are the biggest changes in this edition:

Completely revised and updated: I’ve freshened up the data and examples in this book to provide you the latest insights and analyses. Confused about how tax law changes should affect your investment strategies? Wondering about investing in gold and other commodities? Seeking a way to invest in stocks without exposing yourself to the tremendous risks experienced during the financial crisis of the late 2000s? Curious about what an exchange-traded fund or hedge fund is and whether you should invest in one? Wondering how to use leveraged exchange-traded funds to boost your portfolio’s return? Weighing whether to invest in real estate given current market conditions and the severe downturn in the late 2000s? Wondering what the best ways are to invest globally? Having trouble making sense of various economic indicators and what they mean to your investment strategy? Wanting to invest in a Health Savings Account (HSA) but don’t know why, where, or how? You can find the answers to these questions and many more in this edition.

Investing resources: With the continued growth in websites, software, publications, media outlets, and many other information sources offering investing advice and information, you’re probably overwhelmed about how to choose among the numerous investing research tools and resources. Equally problematic is knowing who you can trust and listen to — and who you need to ignore. So many pundits and prognosticators claim excellent track records for their past predictions, but who, really, can you believe? I explain how to evaluate the quality of current investment tools and resources, and I provide tips for who to listen to and who to tune out.

How Savvy Investors Build Wealth

I know from working with people of modest and immodest economic means that the time-tested ways they increase their wealth are by doing the following:

Living within their means and systematically saving and investing money, ideally in a tax-favored manner

Buying and holding a diversified portfolio of stocks

Building their own small business or career

Investing in real estate

This book explains each of these wealth boosters in detail. Equally, if not more, important, however, is the information I provide to help you understand and choose investments compatible with your personal and financial goals.

You don’t need a fancy college or graduate-school degree, and you don’t need a rich dad (or mom), biological or adopted! What you do need is a desire to read and practice the many simple yet powerful lessons and strategies in this book.

Seriously, investing intelligently isn’t rocket science. By all means, if you’re dealing with a complicated, atypical issue, get quality professional help. But educate yourself first. Hiring someone is dangerous if you’re financially challenged. If you do decide to hire someone, you’ll be much better prepared if you educate yourself. Doing so can also help you be more focused in your questions and better able to assess that person’s competence.

Conventions Used in This Book

I use the following conventions in this book to help you maneuver through topics:

I italicize all new words and terms that are defined.

I boldface keywords or the main parts of bulleted items.

I use monofont for all web addresses.

I refer to the decade from 2000 to 2009 as the 2000s. I just wanted to avoid any confusion in case you were thinking of, say, the year 2025.

When this book was printed, some web addresses may have needed to break across two lines of text. If that happened, rest assured that I haven’t added any extra characters, such as hyphens, to indicate the break. So when using one of these addresses, just type in exactly what you see in this book, pretending as though the line break doesn’t exist.

Foolish Assumptions

Every book is written with a certain reader in mind, and this book is no different. Here are some assumptions I made about you:

You may have some investments, but you’re looking to develop a full-scale investment plan.

You’d like to strengthen your portfolio.

You want to evaluate your investment advisor’s advice.

You have a company-sponsored investment plan, like a 401(k), and you’re looking to make some decisions or roll it over into a new plan.

If one or more of these descriptions sound familiar, you’ve come to the right place.

How This Book Is Organized

This book helps you fill gaps in your investment knowledge. It’s structured so you can read it cover to cover or simply dive in to particular sections that most interest you. Here are the major parts.

Part I: Investing Fundamentals

Before you can confidently and intelligently choose investments, you need to be able to cut through the lingo and jargon to get to the heart of what investments are and aren’t, and you also need to know how they differ from one another. In this part, I explain what rate of return you can reasonably expect to earn and how much risk you need to take to get it. This part also details how investments best fit your specific financial goals and situation.

Part II: Stocks, Bonds, and Wall Street

I know you probably don’t want to trade in your day job for one where you wear a three-piece suit and know which page of the daily Wall Street Journal shows the yield curves. But you do need to understand what the financial markets are and how you can participate in them without suffering too many bumps and bruises. In this part, I explain what stocks and bonds are all about and how to best buy them and build your future fortune.

Part III: Growing Wealth with Real Estate

Everyone needs places to live, work, and shop, so it makes sense that real estate can be a profitable part of your investment portfolio. Intelligently buying and managing real estate is harder than it looks, however, which is why this part covers lots of territory. I show you the best ways to invest in real estate, and I provide a crash course in mortgages, landlording, buying low, selling high, taxes, and more.

Part IV: Savoring Small Business

There’s nothing small about the potential profits you can make from small business. You can choose the small-business investment option that matches your skills and time. If you aspire to be the best boss you’ve ever had, this part shows you the right ways to start your own small business or buy someone else’s. Or maybe you’d like to try your hand at spotting up-and-comers but don’t want to be on the front lines. In this case, you can try investing in someone else’s small business.

Part V: Investing Resources

Flip through your cable television channels, crack open a magazine or newspaper, or go website surfing, and you quickly discover that you can’t escape investment advice. Surprisingly, each new guru you stumble on to contradicts the one who came before him. Before you know it, although you’ve spent a ton of your valuable free time on all this investment stuff, you’re no closer to making an informed decision. In fact, if you’re like most people, you find yourself even more confused and paralyzed. Fear not! In this important part, I explain why many experts really aren’t experts and why most of them try to make the world of investing so mysterious. I highlight the best resources to use and the experts worth listening to.

Part VI: The Part of Tens

These shorter chapters build your investment knowledge further. You find advice about topics such as overcoming common psychological investment obstacles, points to ponder when you sell an investment, and tips for investing in a down market.

Icons Used in This Book

Throughout this book, icons help guide you through the maze of suggestions, solutions, and cautions. I hope you find that the following images make your journey through investment strategies smoother.

In the shark-infested investing waters, you’ll find creatures that feast on novice waders, ready to take a bite out of a swimmer’s savings. This icon notes when and where the sharks may be circling.

If you see this icon, I’m pointing out companies, products, services, and resources that have proved to be exceptional over the years. These are resources that I would or do use personally or would recommend to my friends and family.

I use this icon to highlight an issue that requires more detective work on your part. Don’t worry, though; I prepare you for your work so you don’t have to start out as a novice gumshoe.

I think the name says it all, but this icon indicates something really, really important — don’t you forget it!

Skip it or read it; the choice is yours. You’ll fill your head with more stuff that may prove valuable as you expand your investing know-how, but you risk overdosing on stuff that you may not need right away.

This icon denotes strategies that can enable you to build wealth faster and leap over tall obstacles in a single bound.

This icon indicates treacherous territory that has made mincemeat out of lesser mortals who have come before you. Skip this point at your own peril.

Where to Go from Here

If you have the time and desire, I encourage you to read this book in its entirety. It provides you with a detailed picture of how to maximize your returns while minimizing your risks through wealth-building investments. But you don’t have to read this book cover to cover. If you have a specific question or two that you want to focus on today, or you want to find some additional information tomorrow, it’s not a problem. Investing For Dummies, 6th Edition, makes it easy to find answers to specific questions. Just turn to the table of contents to locate the information you need. You can get in and get out, just like that.

If you’re the kind of reader who jumps around from topic to topic instead of reading from cover to cover, you’ll be pleased to know that this book has a helpful index and that it highlights the pages where investing terms are defined.