Your crash course in market investing

Look at investments closest to home
Many companies offer their employees stock options, which can be a great and cheap way to get into the market, especially if you're a first-time investor. Often, you can buy in at a discount, putting you ahead from the start. But that doesn't mean it comes without a warning.
"One caveat is that you're kind of doubling up on risk if you invest a lot of your portfolio in an employer's stock. If things don't go well, you could be faced with loses in your portfolio and the loss of your job," explained Tran. Anyone remember the Enron debacle? A basic rule of thumb is that you shouldn't have more than 20 percent of your money in a single stock, and that includes options offered by your company.

Heed any red flags
If you read the annual report cover to cover and you still haven't got a clue what the company does, chances are you want to take your money elsewhere.

Other things that might tip you off to a bad investment are an uncooperative management team and a high trading price that just doesn't add up. "You don't want to invest with a management that isn't trustworthy. They should present a fair and balanced view of the business," said Tran. By the same token, you're looking for a good deal, and one that's going to make money, not lose it. If you've looked at the price-to-earnings, or P/E ratio (the stock's current price divided by its most recent earnings) and it doesn't seem fair compared with other companies in a similar business, you may want to back away -- or at least do some more extensive research.

Once you're in, sit on your hands
I'm a firm believer that boring is better when it comes to the market -- pick a couple of low risk investments and, then let it ride -- at least until something about the company changes fundamentally. If the market dips, take a walk, go on vacation or read a book; anything if it keeps you from selling, because the point is to be in the game for the long haul.

With reporting by Arielle McGowen.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, www.jeanchatzky.com.

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