Stocks and Exchange

The only Book you need

Ladis Konecny

• Publisher: Books on Demand
• Year: 2018
• Print ISBN:
  9783848220656
• Edition: 4
• eBook ISBN:
  9783848278534
• Topic: Business
• Subtopic: Business General
• Index: Business

The book "Stocks and Exchange - the only Book you need" is intended for the general public from 11 to 85 years. Although the book is easily understandable, it describes in detail the parameters, which are ideal for safe and profitable investments in stocks or companies - whether short term or long term. When to sell or buy? This is technical and fundamental analysis at its finest. Which stocks can finance your pension with dividend payments? This book is the result of many years of practice and study of relevant literature. The book describes the strategies of the most famous investors and also my own experiences with stocks. Investment funds and pension insurance are discussed. The book contains a little information on business economics for investors and a lot of important information about the business on the stock exchange. The courses of three economic crises and crashes are investigated. The small lexicon explains 195 technical terms. There are some case studies about investors, companies and their stocks. Also described is the investment in gold, commodities and derivatives. Because the state expects ever more personal responsibility for your retirement arrangements, this book is also a very meaningful gift for your younger family members. Unfortunately there are only very few profound and above all honest books on shares thereby making this one all the more valuable.

1. Foreword

Investing in shares is a very lucrative and, if done right, less risky way to generate the capital you need for your own home and much faster than with a home loan and a savings contract. It makes more sense to invest in stocks than in various supplementary insurances to supplement or even double the old-age pension. You are creating a solid income with the dividends and you may even be able to quit your job by age 50 or 55. Also your descendants will enjoy the dividends, since they will inherit your stocks. But they will receive nothing of your statutory pension.

This book is dedicated to the beginning and the advanced investors from 11 to 85 years. It was published in four languages. This book will be the only one you need for successful investing in stocks. It is written simply and formulated clearly with the avoidance of foreign words. It is sufficient to have a reason, intelligence and the skills in mathematics of an 11-year-old child and to have this book, if you want to have success with the investment in stocks. Many books on the investor Warren Buffett do not contain any information about the valuation multiples of those stocks, in which he invested. Therefore, you cannot understand, why they had such an interesting grow potential for him. The required ratios: P/E, P/B, P/S, ROE, earnings growth, the company's debt and the corresponding explanations will be found exclusively in the Mary Buffett's book “Buffettology” and here in my book.

This book explains, which stocks to keep only a few years and sell at a profit and which stocks to keep a lifetime as your pension from dividends. This book describes: the great stock crash of 1930 and 2001, as well as the financial crisis of 2008. Stock funds, bonds, insurance, gold, commodities, Forex and derivatives are explained and how to invest in them. A little lesson in economics is included too. The strategies of Peter Lynch, John Templeton, Ken Fisher, Philip Fisher and Andre Kostolany are described in the chapter ”Experts”. The strategies of Warren Buffett and Benjamin Graham are described in their own chapters. The chapter “Fundamental Analysis” is a description of the stock parameters and the characteristics of companies that have to be considered for a risk-free and profitable investment.

The chapter “Technical Analysis” deals with the short-term trading of stocks and explains the determination of the buy-signals and sale-signals from the charts. Everything useful for trading is here. I turned the falsehoods into truths and incorporated my own experiences.

The chapter “Wisdoms” is a large collection of sayings, wisdoms, ideas and quotations of famous investors, politicians, philosophers and not least of mine, based on the topics: stocks, stock exchange, money and wealth.

The best ideas from Warren Buffett, Benjamin Graham, Ken Fisher, Philip Fischer, Peter Lynch, John Templeton and André Kostolany are merged in this book. The lexicon of the 195 most important terms of the stock market and the economy is at the end of this book. I was gathering the texts for this book since 2004. Everything was updated in 2021. This book contains all mine gained practical experiences in value-oriented equity investment during 20 years.

Which stocks you should buy for only one year and which stocks you should keep for their dividends forever? Check in the magazines and on websites the parameters of the stocks of Dow Jones, DAX, EuroStoxx 50 and Stoxx 50, or simply look at my website! My website has the address nr1a.com/STOCKS since 2002_. I show constantly the stocks with growth potential in the current year on my website nr1a.com

The best websites with fundamental dates of enterprises and stocks:

www.morningstar.com , finance.yahoo.com

The picture on the cover is a chart of MAN SE share from the index DAX or MDAX at the stock exchange Xetra, with the indicator SMA 200. Source: www.comdirect.de

If my book doesn't say anything new to you, then it is suitable as a gift for your son, father or brother for Christmas or a birthday.

I wish you good entertainment and a successful hand for your stock investment. This “know-how” will help you to the success with stocks your entire life long.

If you will find in this book a false statement or a typing error, please write me! It will be corrected in the next issue of my book. Thank you!

Please, allow me to write 100 thousand dollars as 100.000 USD instead of $ 100,000!

E-mail: [email protected]

Ladis Konecny, 12th August 2021

2. Stocks and exchange

2.1 Why invest in stocks?

Imagine that beginning 1990, you invested 10.000 dollars in a savings account, in the insurance or bonds, or in a certificate on the German index DAX, at the lowest level of 1990, or you would buy the American technology stocks: EMC Corp., Dell Computer Inc., Cisco Systems Inc., at the lowest price of 1990. You would have 12.000 dollars from your 10.000 dollars with the savings account after 10 years, 15.000 dollars with the insurance or bonds, 60.400 dollars with a certificate on the index DAX. Or 14 million dollars with shares of EMC, on the top price of 2000, 12 million dollars with shares of Dell and 11 million dollars with shares of Cisco. And your profit with stocks would be tax free in some countries after some years.

Investment in stocks has two important reasons:

1) To obtain the necessary capital, if you want to buy a flat. 2) To double the pension at 65 years, or to enjoy your pension earlier. You can practise both of these goals and hold some stocks for one year to four years and other stocks hold forever only for dividends.

2.2 The share

The share or stock is a security. The individual share of a company represents a fractional part of the company value. The share is an equity paper, which certifies and confirms that you are a proportional co-owner of a company.

The shareholder has the right to a portion of the earnings generated by the company in the form of dividends. In addition, he has the right to vote at the annual general meeting of the company and he has the right to a reduction on the issuance of new shares. If the company will be dissolved, the shareholder has the right to receive a part of the company assets. You can get the dividend in cash, or in new shares, or in the company's products in the amount of dividends. The shareholder cannot sell his shares back to the company, but he can sell them on the stock exchange to another man. An exception arises, when the company is dissolved. Then the shareholder gets back the money from the company for his shares, but for another price than he paid.

In recent years, there are nearly no more stocks in the paper form, the stocks are only virtually listed in stock accounts. The statement of your bank account confirms you as the shareholder. Some few companies make the exception: they issue paper stocks in small quantities and the shareholder frame them and hang them on the wall. Stocks are no longer so easily counterfeited, since they don't exist in paper form.

Stock exchange

Stocks are traded on stock exchanges. The stock market is a space, where the stockbrokers sit at computers and they trade from there electronically and worldwide with the stocks from your account, if you order them to do so. The trading of stocks on the stock exchange is cheaper online, from your home computer. The order by telephone is slightly more expensive. The most expensive fee for an order is, if you authorize bank employees personally at the bank counter. Stocks are then either purchased from another stockholder or acquired from the book of a stockbroker. Don't let a stockbroker suggest, which stocks you should buy or sell! These brokers generally have not the necessary knowledge, to advise you on one or the other. They lack the knowledge of the fundamental analysis of stocks. They only handle the processing of sales or purchases of stocks.

After the issue, the new shares are sold in a primary market outside the stock exchange, only to some banks, insurance companies and funds. The primary market is the trading of shares of new issues without the stock market. Later, the shares change hands on the secondary market. The organized secondary market is the stock exchange. In addition, there is also a not organized over-the-counter market = OTC.

The stock market exists since about 1420 before Christ and has its origins in old Egypt. Later, there was also a stock exchange in ancient Rome. We should note the year 1409 after Christ as the initial establishment of the stock exchange, when the stock exchange was founded in Belgian Brugge. The stock exchange in neighboring Antwerp was created in the year 1460. At that time, the stock market took place under the open sky. Since the year of 1531, there has been the first exchange in a building in Antwerp.

Stock company, Corporation (Corp.), Incorporated (Inc.)

The creation of a company officially appears in the commercial register. There are various types, under which a newly founded company can operate. A company can become a corporation, if the founder or founders put together a certain capital, or insert into the company. It can be for example 50.000 USD. In a small company, the founders give their shares to themselves and to friends and the shares are not sold on the public market. When the company needs more capital, the company can be transformed into a public stock company and increase the share capital by sales of shares on the stock exchange. This is called “going public”. The share capital is the sum of nominal values of all shares and it must be at least 50.000 USD. The nominal value of one share must be at least 1,00 USD. If there is a great interest in shares, the first stock price will be at a “agio“ higher than its nominal value. The share issue does an investment bank. The bank charges a fee of 3% to 7% of the value of issued shares, for working with the share issue. The first share issue of a company and the placement of shares on the stock exchange (IPO = initial public offering) must be approved by the stock market.

The subscribed capital (= share capital = basic capital = nominal capital) + agio (= capital reserve) + earnings reserve = shareholder's equity.

The stock company has two birthdays: 1) when it was founded and 2) when it issued shares. The company has only once a profit from the shares: when it sold its shares at the issue. In the later stock trading, only the shareholders have their profit from the shares. About half of the newly founded companies go bankrupt within five years. Only half of the new stocks grow in the first year. Often, it may be worthwhile, if the investor buys only stocks, which were traded on the stock exchange at least five years.

The foreign names of a company are: Aktiengesellschaft (AG), Sociedad Anonima (S.A.), Societas Europaea (SE).

Companies work for a single reason: profit making. The profit (earnings) is the money, which remains as profit from sales, if all bills were paid. Companies with a poor management don't achieve a satisfactory profit. The stock price of such a company is going down, when the company's profit goes down. Shareholders are not happy about it and if they own common shares and no preferred shares, at the annual general meeting, they can force the management to make the company more profitable, or they can force the management to resign and choose a new management for the company.

Where are stocks stored or deposited?

There is a central depository or a collecting bank for securities. Stocks are listed exclusively electronically today. The central depository for stocks in Europe is the Clearstream International S.A., with headquarters in Frankfurt and Luxembourg. In the case of insolvency (bankruptcy) of your bank or of your broker, you will not lose your stocks, because they are not owned by your bank or broker. Your stocks are listed in the central depository. You will lose your stocks only, if your company is bankrupt like Enron and you didn't sell your stocks soon enough and stock prices fell to zero.

2.3 How is it with books?

Before your first stock purchase in your life, it would be good to read four books about the investment in stocks:

1. "Stocks and Exchange" by Ladis Konecny
2. "Buffettology" by Mary Buffett and David Clark
3. "Value Investing made easy – Benjamin Graham's classic Investment Strategy explained for everyone" by Janet Lowe
4. "The five Rules for successful Stock Investing" by Pat Dorsey

It is also sufficient, if you will read only my book. So you can alone already assess, which stocks would like today these reasonable investors: Warren Buffett, Benjamin Graham, Peter Lynch, John Templeton or Phil Fisher. You will select and buy six to ten of these stocks from the United States and Europe. But don't buy the same stocks, which Warren Buffett bought right now, because he has often other reasons than to buy cheap and sell expensive. Also an investor from Europe should invest about 66% of his money in stocks from Europe and only the remaining 33% in stocks from the United States.

To invest money, it can be a risky enterprise. But the more you know about it, the risk of loss will be lower and you will more enjoy the investing. If you own your stocks at least one year and they grow slowly but surely, you will have more pleasure, than if you sell them early with a small profit.

Don't lose any time with books on trading! And avoid also stupid books about investing! Who is influenced by stupid books for the long-term investment, can hold stocks in the red for 30 years or sell them at a loss after a few years. Anyone who trades stocks like in the trading books, can expect to close half of his investments at a loss.

In the year 2000, many stupid books on stocks were published. There was for example to read: “If you like Mercedes, Coca Cola and Hamburger, buy the stocks of Daimler, Coca Cola and McDonald's!” “If a share has a P/E 50, it earns probably this valuation. A popular share can be valuated with P/E 50.” “If is the P/E ratio too complicated for you, ignore it!” “Buy stocks that Warren Buffett buys!" Such nonse...

Table of contents

• Table of Contents
• 1. Foreword
• 2. Stocks and exchange
• 3. Stocks short-term, for a few days, 1 year to 4 years
• 4. Stocks long-term, forever only for dividends
• 5. Statistics
• 6. Insurance, pension, savings, credit, bonds
• 7. Fundamental analysis of stocks and the company
• 8. Technical analysis of stock charts
• 9. Funds, certificates and financial advisors
• 10. Dividends and stock sales tax
• 11. Benjamin Graham – investment strategy
• 12. Warren Buffett – investment strategy
• 13. Experts
• 14. Analysts, ratings, stock price target
• 15. Great crash on the New York Stock Exchange 1929-1932
• 16. Great crash 2000–2002 in the USA and Western Europe.
• 17. Great financial crisis 2007–2009
• 18. True stories from the stock exchange and environs
• 19. Wisdoms, quotations, sayings about stocks and money
• 20. Economics in short
• 21. Gold, commodities, raw materials
• 22. Banks, central banks, money
• 23. Derivatives, options, warrants, short sale, CFDs, Forex, futures
• 24. Lexicon, dictionary, words about investment
• 25. Recommended literature and journals
• Copyright