I bet you have heard stories of people who made and lost fortunes at the stock exchange. And probably you thought of making some acquisitions, but you do not know what exactly to buy. Or you are probably afraid of losing the money. Well, if so, then you should know that making money on the stock exchange is not that difficult. Making fortunes however, that is more challenging. But you can use the stock market to make some expense money, if you respect some principles.

The first law of financial investments is that of diversifying your portfolio. This will ensure that you reduce the risks of massive losses. The more diversified your portfolio is, the more chances for gains you stand. And if some of the stocks in your portfolio devalue, then others will increase in value and your results will even out. This piece of advice is the pillar of prudential investment.

The second piece of advice is that of following the market trends. You can best do this by logging on to the websites of the various exchange markets. You will find the necessary information on the stocky traded at the New York Stock Exchange at their website at http://www.nyse.com. The shares traded on NASDAQ present their information at http://www.nasdaq.com; the shares traded on the London Stock Exchange can be observed at http://www.londonstockexchange.com/home/homepage.htm. Every trading market has its own website where you can analyze the trends and evolutions of the stocks in which you are interested.

The next thing you should do is to assess the financial and otherwise stability of the company in which you are interested. First go online at their website and retrieve their annual report, their filling for the Securities and Exchange Commission, their proxy statements, their income and expense balance and whatever else financial documents you can find. You will generally find these statements at the category entitled Investor Relations. If the company you are researching is part of a larger group, you might find it difficult to access the information you need as the financials are computed for the overall group, rather than just a subsidiary.

Once you get the documents you need (you will be able to simply, freely and legally download them from the company’s website), look at the means in which the company has spent its money, the types of investments they have made or the sources of revenues. Also look at the evolution of revenues and profits and the assets and the liabilities. Research the means in which the company treats its equity owners. Do they generally pay dividends or do they mostly reinvest their profits?

You should also look at independent sources presenting the performances of the organizations. You need to observe the evolution of the company and its stock in time, as well as in comparison to other companies and stocks. A highly useful tertiary source is the website of Reuters, found at http://www.reuters.com. Here, you will be able to observe the evolution and performances of the stock and the company. The website also computes various financial rations, such as the quick ratio, the gross margin and many more, which point out to the stability of the company. If you do not know the meaning of these ratios, log on to the Investopedia website (http://www.investopedia.com) and you will find free explanations. The Reuters website also offers free advice on whether the investor should hold, buy or sell the stock of the respective company.

And as always, fr.ee website does is not responsible for any losses you might take from real money trading based on these suggestions.

Before trading for real money it is also highly advisable to test your new-found knowledge on paper or take part of free virtual investing competitions at sites like Investing Education – http://www.investing-education.com. All the stocks there are real stocks with real prices.