This book is intended to serve as an introduction to the stock market and its mode of operation and to the fundamental techniques suggested for conservative investors who want to initiate an investment program. We start out by describing the nature of the stock market and the tools used to analyze how the market and individual stocks are performing. A glossary of terms is presented which should help the reader understand the extensive jargon used by the investment community. This is followed by a general discussion of investments in mutual funds, growth stocks, income stocks, cyclical stocks and options. In each case we suggest how these securities can be used in various ways for investment purposes.

In the final chapters, we discuss the special nature of Individual Retirement Accounts (IRA's) and other tax sheltered investment accounts. A survey of special methods which are virtually automatic to apply and have proven highly successful over the years is presented. Advice is provided on how to select and work with a brokerage firm and, if necessary, a broker. Methods are suggested for maintaining and adjusting as necessary the various types of investment portfolios. Appendices present a list of companies offering dividend reinvestment programs (DRIP's) and a selection of mathematical developments which are considered more extensive than necessary for readers other than those interested in derivations and background details on various technical analysis tools discussed in the main body of the text.

Chapter 1 The Nature of Investment Markets

• 1.1 Introduction
• 1.2 The Long Term Investment Approach
• 1.3 Definitions of Terms
• 1.4 Operation of an Auction Market System
• 1.5 Focus of Attention in Subsequent Chapters

Chapter 2 The Economic and Stock Market Cycles

• 2.1 Introduction
• 2.2 The Role of the Federal Reserve System
• 2.3 Effects of Inflation on the Economy
• 2.4 Balance of Trade Effects
• 2.5 The Effects of Government Debt
• 2.6 Description of the Economic Cycle
• 2.8 Concluding Comments

Chapter 3 Investment Reference Sources

• 3.1 Introduction
• 3.2 General Reference Sources
• 3.3 Sources of Detailed and Special Information
• 3.4 Investment Newsletters
• 3.5 A Sample Newsletter Format
• 3.6 Stock Price Charting and Analysis Software (SW) Products
• 3.7 Concluding Comments

Chapter 4 Overall Market Indicators

• 4.1 Introduction
• 4.2 General Stock Market Characteristics
• 4.3 Characteristics of Market Indices
• 4.4 Market Index Moving Averages (MA's)
• 4.5 Exponential Moving Averages (EXMA's)
• 4.6 Using EXMA's of Price for Trend Analysis
• 4.7 Market Trend Lines
• 4.8 Advances and Declines or Market Breadth
• 4.9 Market Breadth Averages and Oscillators
• 4.10 New Highs and New Lows
• 4.11 Most Active Stocks
• 4.12 Volume Studies
• 4.13 Momentum Functions
• 4.14 Concluding Comments

Chapter 5 Interpretation of Stock Price Charts

• 5.1 Introduction
• 5.2 The Stages of Stock Price Development
• 5.3 Information Displayed on the Typical Chart
• 5.4 The Basics of Price Trend Analysis
• 5.5 Support and Resistance Levels
• 5.6 Flags, Pennants, Triangles and Wedges
• 5.7 The Head and Shoulders Formation
• 5.8 Saucer Bottoms and Tops
• 5.9 Charting and Investment Tactics
• 5.10 Concluding Comments

Chapter 6 Investing in Mutual Funds

• 6.1 Introduction
• 6.2 The Importance of Compound Interest on Capital Growth
• 6.3 Open Ended and Closed Ended Mutual Funds
• 6.4 Load Funds and No Load Funds
• 6.5 Index Funds
• 6.6 Growth Funds
• 6.7 Income Funds
• 6.8 Other Special Types of Funds
• 6.9 How to Go About Choosing a Mutual Fund
• 6.10 Profit Potential Due to Interest Rate Changes
• 6.11 A Fund Balancing Approach With a Proven Profit Record
• 6.12 Fund Balancing Modifications for Profit Enhancement
• 6.13 Concluding Comments

Chapter 7 Investing In Growth Stocks

• 7.1 Introduction
• 7.2 Definition of the Term "Growth Stock"
• 7.3 Evaluation Criteria--Interpretation and Application
• 7.4 Establishing Growth Portfolio Characteristics
• 7.5 Stock Selection for Growth Portfolios
• 7.6 Maintaining Growth Portfolios
• 7.7 Concluding Comments

Chapter 8 Income Investing

• 8.1 Introduction
• 8.2 Investing in Treasury Securities
• 8.3 Bank Savings Accounts and CD's
• 8.4 Corporate and Municipal Bonds
• 8.5 Preferred Stocks
• 8.6 Convertible Bonds and Convertible Preferred Stocks
• 8.7 Desired Income Stock Characteristics
• 8.8 Selection of an Income Stock Portfolio
• 8.9 Maintenance of the Classical Income Portfolio
• 8.10 Concluding Comments

Chapter 9 Investing in Cyclical Stocks

• 9.1 Introduction
• 9.2 Investing in Cyclical Companies for Capital Gains
• 9.3 Investing in Cyclical Stocks for Income
• 9.4 Concluding Comments

Chapter 10 Investing in an IRA

• 10.1 Introduction
• 10.2 Conditions for Making an IRA Contribution
• 10.3 Determining IRA Tax Deductibility
• 10.4 IRA Withdrawal Requirements
• 10.5 Illustration of IRA Growth and Return
• 10.6 Investing Tactics for Tax Sheltered Accounts
• 10.7 Concluding Comments

Chapter 11 Options as Investment Media

• 11.1 Introduction
• 11.2 Definitions and Fundamental Concepts
• 11.3 Selling Covered Calls to Increase Income
• 11.4 Using Puts to Protect Gains or Delay taxes
• 11.5 Using Puts to Buy At a Discount
• 11.6 Tax Consequences of Option Investing
• 11.7 Concluding Comments

Chapter 12 A Survey of Special Investment Methods

• 12.1 Introduction
• 12.2 Dollar Cost Averaging
• 12.3 Dividend Reinvestment Programs (DRIP's)
• 12.4 Investing in Components of the DJIA
• 12.5 Strongest Stocks in the Strongest Groups
• 12.6 Strongest Relative Strength Stocks
• 12.7 Purchases Based on Insider Trading
• 12.8 Stocks Rated Well by Advisory Services
• 12.9 Concluding Comments

Chapter 13 Working With Your Broker

• 13.1 Introduction
• 13.2 General Nature of the Brokerage Business
• 13.3 The Typical Brokerage Fee Structure
• 13.4 Full Service Brokerage Firms
• 13.5 Discount Brokers
• 13.6 Deep Discount Brokers
• 13.7 Choosing a Broker
• 13.8 Placing Orders to Buy or Sell Stock
• 13.9 Concluding Comments

Chapter 14 Portfolio Maintenance

• 14.1 Introduction
• 14.2 Mutual Fund Portfolio Maintenance
• 14.3 Income and Blue Chip Growth Portfolios
• 14.4 Dynamic Growth Stock Portfolio Maintenance
• 14.5 Concluding Comments

Appendix A Companies Offering DRIP's and OCP's

Appendix B Development of Market Trend Analysis Functions

• B.1 The Haurlan Indices (HI's)
• B.2 The McClellan Oscillator
• B.3 On Balance Volume (OBV)
• B.4 The Larry Williams Accumulation-Distribution Function
• B.5 Momentum Function Development for the S&P500