How to Make Money in the Stock Market

1. Step 1
   Shop for undervalued companies.
   
2. Step 2
   Find stocks that have price-earnings ratios significantly lower than those of their peer group.
   
3. 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.
   
4. Step 4
   Pick the jockey, not the horse. Find out who is running the company and where the executives worked previously.
   
5. Step 5
   Look for strong balance sheets. Companies with low debt loads, positive cash flow and consistently good earnings are good prospects.
   
6. 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.
   
7. 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.
   
8. Step 8
   Work hard. Do research. Read financial news. Study quarterly and annual reports as well as registration statements, looking for trends and opportunities.
   
9. 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.