Making money on the stock market is not a game or a coincidence. It requires education, a good judgment and hard work.  Indeed, shareholders learned a great deal last year with disconcerting economic news, more bank and fund bailouts and a political assassination that sent oil prices higher and illustrated how nervous and vulnerable markets have become.

Some questions you should ask yourself before investing include: Can I do it by myself or do I need the assistance of a stock broker? Do I prefer receiving information by exchanging with people or by reading? What type of information do I prefer, technical or expository? What is my risk tolerance? How would I feel if a stock I bought for $30 went down to $20 in less than a week? You should take your time making decisions because you are investing for the rest of your life.

Get an Education

Warren Buffet is not the only investment guru who has written books. Peter J Tanous is the author of the bestselling Investment Gurus. With the contribution of John Rothchild, Peter Lynch, former Fidelity Magellan Fund Manager wrote One Up on Wall Street and Beating the Street. Read publications such as Barron's, Money, Kiplinger's, Forbes and the Motley Fool Stock Advisor. Visit these websites: http://money.cnn.com/, www.Bloomberg.com, www.finance.yahoo.com, www.smallcapinvestor.com/, www.thestreet.com/.

Individual Stocks Versus Mutual Funds

Stocks represent shares of ownership in a public company. Examples of such companies include IBM, Microsoft, McDonald's, Coca-Cola, and Caterpillar. There are advantages to owning individual stocks. The main benefit is that you have control. You decide how much to buy, what to buy, and when to buy and sell. A mutual fund is a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund has a manager who is responsible for investing the pooled money into specific stocks. When you invest, you are buying shares of the mutual fund and become a shareholder of the fund. It is the manager of the fund who makes all the decisions.

Different Kinds of Stocks

The most common ways to divide the markets are by size, style, and sector. Some investors may also compare large-cap against small-cap stocks, energy against technology stocks or growth against value stocks.

Stocks by Size

When talking about a company's size, we are referring to its market capitalization, the current share price times the total number of shares outstanding. Large-cap companies tend to be established and stable, but because of their size, they have less growth potential than small caps. General Electric, one of the most highly valued companies in the world with a market cap of more than $350 billion, has posted steady long-term returns, but don't expect it to double soon. Small-cap stocks have tended to rise at a faster pace.

Stocks by Categories

A growth company is one that is expanding at an above-average rate. Acquire a thriving growth stock early on, and the ride can be fantastic. However, the greater the potential, the bigger the risk. Growth stocks ride high in good times, but sink when expansion slows.

A value stock trades at a lower than average earnings multiple than the overall market. The company has probably been in trouble, causing the stock to plunge. A value investor might presume the fundamental business is still good and its true worth is not reflected in the low stock price.

A cyclical company sells something that is not in steady demand throughout the year or over the years. As the name implies, these stocks can bounce a lot.

Stocks by Sector

Energy, health, commodities, financials, pharmaceuticals are all examples of investment sectors.

Examples of Types of Mutual Funds:

Growth Funds - These funds invest in stocks believed to be the fastest growing companies in the market. Growth funds rarely provide dividend income and are considered risky investments.

Value Funds - These funds invest in large and mid-sized companies that appear to be overlooked. These undervalued stocks usually pay dividends.

lend Funds - These funds are a "blend" of both growth and value stocks.

Hedge Funds - These funds charge a performance fee and are typically open to only a limited range of qualified investors. Exotic financial instruments and strategies are often used to make money and reduce risk for wealthy clients. Fund managers themselves sometimes can't predict the consequences.

Learn How to Read Stock Charts

There are many factors on a stock chart that contribute into making decisions. You have to be able to analyze all of these factors and come to a conclusion about whether or not to risk your hard earned money on a stock investment. Some of the questions that you want to ask yourself about the chart are: What stage is this stock in? Is this stock in an uptrend or a downtrend? Is the stock at the beginning, middle, or end of the trend? Are there any chart patterns? What does volume tell me? Over the short term, the behavior of the market is based on enthusiasm, fear, rumors and news. Over the long term, it is mainly company earnings that determine whether a stock's price will go up, down, or sideways.

Go to the Source

The investor section of a company's Web site contains a wealth of information, including slide shows, fact sheets, historical information about the stock, recent news and upcoming events. You'll also find the financial reports that publicly traded companies are required to file with the Securities and Exchange Commission; you can also access this material at http://www.sec.gov/edgar.shtml. Study the latest earnings release, and listen to the quarterly earnings call, which is usually broadcast live from the company's Web site several hours after an earnings announcement.

Several Rules for Investment Success

-Recent quarterly earnings and sales should be up 25% or more

-Pick companies with management ownership of stock

-Find out if the market currently favors big-cap or small-cap stocks

-Pick companies with superior new products or services

-Check into companies buying back 5% to 10% of their stock

Know when to Sell

-Sell early to profit from gains. Experts say it is better to leave money on the table than to get out late.

-Be wary of big price declines in heavy trade. That is a sign that big-money investors are dumping shares.

-Watch out for climax tops. This occurs when a stock that already has had a huge run-up suddenly races higher and faster than it ever has before.

-New highs on low volume are a bad sign. Consider selling when a stock hits new highs on low volume.

Diversify Your Investments

Don't put all your eggs in the same basket. If a stock bombs, you lose huge amounts of money. Diversification is the idea of spreading out your money across many different types of investments. When one investment is down another might be up. Choosing to diversify your investment holdings reduces your risk tremendously.

Several Warren Buffet's Tips for Investing:

-Never invest in a business you can not understand.

-Buy companies with strong histories of profitibalities.

-Focus on return on equity; not on EPS.

-Always invest for a long term.