[RT Wolf]

I'll try to make this quick. You're getting some great advice on both personal finance and stock investing. Off the top, I would recommend getting some personal finance books as well as any advice you can get on it. Personal finance is about managing your money while stock investing is just about a method for growing. Arguably, it's a good idea to be at least a little diversified in terms of what assets you hold. The major categories for that diversification are physical assets (land, houses, rental property, etc), equity (stocks and options and so forth) and debt (bonds, debentures and so on).

The second thing to realize is that there's no real "accepted convention" about investing. Largely though, there's three kinds of investing strategies:

Passive: I mean completely passive, buy it and forget it sort. Mutual funds and index funds fall here. When buying mutual funds, recognize that most of them don't even match the market. Index funds match teh market and have very low expense ratios. So, in this category, either an excellent mutual fund or index fund is your best option. If you don't feel like doing the research to buy the right mutual fund, then just buy an index fund. It's a perfectly acceptable strategy to hold your entire investment fund in index funds.

Mechanical: These are strategies that are just as they're called, mechanical. The Dogs of the Dow, the Magic Formula (outlined in The Little Book That Beats the Market by Joel Greenblatt, highly recommend it) and a simple low P/E strategy fall into this category. Most of these are buy a few stocks according to certain characteristics, hold for a year, sell and then buy the new best stocks. You can find more information abuot each of those by googling them. Generally, those few have beaten the market.

Active: There's a whole lotta strategies in here. This basically means you pick your own stocks and do your own research. There's a few "styles" of investing here, including day trading, momentum investing, value investing, contrarian investing and so on. I suppose the two biggest ways to research stocks is fundamental analysis (looking at hte numbers of the corporation to determine if it's a good company and a solid buy), and technical analysis (looking at the stock price of the company to recognize patterns in the stock price).

Two terms to look out for, as well, "speculating" and "investing". Speculating is just that, speculating that by buying a stock, you'll make lots of money and the stock will rise for little or no logical reason. Investing involves work (that's why not everyone is a stock market millionaire). I'd say you're speculating right now. There's nothing wrong with that, considering it's your money. I would suggest keeping close track of your investments at the end of the year and then comparing them to standard metrics, such as how well the S&P 500 did, etc. Might change your mind.

There's really no "right" or "wrong" way to invest, it's pretty much whatever makes yuo the most money. I strongly believe value investing is the best way to invest, using fundamental analysis. Even a simple low P/E strategy has done phenomenally well over the long term (beating the market), and buying a few choice companies promises to get even more returns.

Just a quick overview, value investing is you're looking for unrealized value in a company. Say, the stock of a company is trading for 5 dollars and your calculation of its intrinsic value says that its worth 10 dollars a share, in this case, I have a 50% margin of safety from my calculation of intrinsic value. 50%s are pretty rare in this market, so I would pretty much put all my chips down. I'm also with Buffett when he says diversification is for those people who don't know what you're doing.

Value investors also have a different idea of risk. If I purchased the above stock and the price promptly fell to $2.5 dollars (so I've lost 50%) I would mortgage the house again and buy as much of it as I could. Which is contrary to what most people would do, because I'm thinking that the stock is gotten cheaper, kinda like something you really want going on sale.

I'll prolly make a mindmap and post that soon, to try to show the relationship between it all.

HH