• Stocks can be a tumultuous investment.stocks and shares image by Andrew Brown from Fotolia.com
  
  The stock market can be a dangerous place to invest if you don't know what you are doing. It is wise to know exactly what what you are investing in when you sink your hard-earned money in shares of corporate stock. Stock tips from friends, neighbors, or even your stock broker may help, but do your own research and ask questions about the stocks you wish to buy.
  
  

How Much Do I Have to Invest?

• Only invest money you don't need for living expenses.stack of cash image by jimcox40 from Fotolia.com
  
  When planning to buy stocks, begin by determining how much money you can afford to invest.Stock market investing comes with inherent risks. You might just as easily lose money as make money. Evaluate how much money you feel comfortable investing in a particular stock or group of stocks. Stick to that dollar amount. The figure should be no greater than the amount of money you would feel comfortable giving away. If the value of your stock deteriorates, you could lose every cent you invest.
  
  

What Does the Company Do?

• Investigate as much information about a company as possible.searching image by dinostock from Fotolia.com
  
  Before you invest in a company, make sure you know what the company does and how they do it. You may be familiar with a particular company because you hear its name used often in the media, but you should make yourself aware of which business sector the company is involved with and what products or services it actually provides. Research the company in respected business publications. Ask your broker or investment adviser in which state the company is incorporated, and contact the secretary of state to inquire about receiving a copy of the company's annual report. Check with the state's securities regulator, the Better Business Bureau or the SEC to discover whether any complaints have been lodged against the company, its business practices or managers.
  
  

How Profitable is the Company?

• A company operating with substantial debt may be a risky investment.profit/loss image by Warren Millar from Fotolia.com
  
  Ask about the company's profitability and the future prospects for profit, depending on market saturation and how the company compares with competitors. Inquire into the company's financial picture by reading its balance sheet and how much debt the company has vs. how much income. Visit your public library and ask for available resources relevant to the company or its market sector, such as a payment analysis and credit reports, current and past lawsuits, liens or judgments. Request written financial information from your broker or from the company's investment relations department. Specifically, obtain a financial prospectus, annual reports and financial statements to help develop a clearer picture of the company's financial history and sustainability.