Now that you hopefully have a basic understanding of the stock market, let’s talk a little about some strategies. Please keep in mind thought that there is no secret formula to making money. Even the best lose money. You can go out and pay advisers high fees and there are still no guarantees. Please be aware that I’m not certified to give professional advice. The following though is what I believe to be some basic, fundamental investing advice:

1) Buy low, sell high. The important thing to always remember is that a stock is an investment, one that should make money. Stock prices will fluctuate, and it’s important to try to time your trades at the right moment.

2) Avoid following the crowd. There’s a wise saying that states that during a gold rush, you shouldn’t dig for gold, you should sell shovels. A popular stock that a lot of people are buying will probably cause the price to rise quickly, to a price that is more inflated by the temporary demand than more fundamental basics.

3) Do your homework. A good stock trade should be well researched. You don’t have to skim through pages and pages of their financials, but a little look into their bigger numbers (profit, revenue, debt, cash flow) can’t hurt. Take a look at what others are saying about the stock. Think about the industry that the company is in. Is it growing? Will the company be around 100 years from now?

4) Remember that the market is an animal all on its own. Stocks rise and fall for silly reasons sometimes. Rumors, what one big investor trades, and speculation all affect price. Just last week, the outcome of the Italian prime minister election caused the market to drop significantly. Be aware that even your best trades are still subject to the market and it mind of its own.

5) Invest in great companies, not just good ones. It is the expectation that companies will make money and do good, otherwise they’ll decrease in price. You want to look for companies that show strong potential for a lot of growth.

6) Look for strong companies that for some reason have taken a beating in their price. One example: Bank of America (BOA). If you remember, Bank of America took one of the worst beatings during the recent recession. They had a rough acquisition or two and were at the center of a bunch of lawsuits dealing with mortgages. Their stock price took a hit, a big one. Little by little, they started to get it back together. The lawsuit passed and the economy came back. That’s when I bought their stock. I knew that fundamentally they were a good and strong company that had just had a rough time. It’s been going up ever since.

If you are serious about investing in the stock market, I’d recommend using “pretend money” to start out with. There are plenty of websites out there to track your “pretend transactions” or you could just keep notes for it somewhere. Play the game a month or so and see how you’re doing. You don’t have to check it everyday, but at least once or twice a week is smart. By doing this, you’ll learn how it works and get a feel for the market. Also, you’ll need to make sure you have a quality computer that’ll keep up with you – check out this post on the top laptops for stock trading. 

Finally, please don’t go out tomorrow and drop a ton of money into the market. Smart investing takes time and energy. Wait it out, do you homework. Investing foolishly isn’t investing; it is just gambling.