How to Make Money in the Stock Market

Making money requires work - even in the stock market. Most successful investors study a variety of sources and ask a lot of questions.

STEP 1
   Shop for undervalued companies.
STEP 2
   Find stocks that have price-earnings ratios significantly lower than those of their peer group.
STEP 3
  
Watch for bad news. Wall Street often overreacts to bad news such as missed earnings, which will drive a stock lower than it should go.
STEP 4
  

Pick the jockey, not the horse. Find out who is running the company and where the executives worked previously.
STEP 5
  
Look for strong balance sheets. Companies with low debt loads, positive cash flow and consistently good earnings are good prospects.
STEP 6
  
Check out the portfolios of successful mutual-fund companies. If they are getting great returns year after year, they are holding stocks you might want to buy.
STEP 7
  
Know when to cut your losses. You want to invest for the long term, but you don't want to stick with a consistent loser.
STEP 8
  
Work hard. Do research. Read financial news. Study quarterly and annual reports as well as registration statements, looking for trends and opportunities.
STEP 9
  
Grill your broker. If the broker is recommending XYZ stock, ask for a detailed explanation, with an eye to growth prospects and historical performance.
 
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