Ever get a hot stock tip?  Usually a bad idea.  Think about it . . . when are you getting the information?  Before or after the "smart" money?

There is an old saying about poker that is appropriate here-- in the first few minutes of the game, if you can't figure out who the sucker is-- it's you!  The odds of you winning in a hot stock tip are slim.  If you want to invest in a stock you have to do your homework, here is what you should know about a company:

• Revenues (Sales) on the rise?  How do they compare to similar companies?
• Expenses rising slower than sales?
• Profits on the rise?  How do they compare to other companies in  the industry?
• How is the balance sheet?  Assets invested in income producing activities?  Liabilities look normal?  To answer these questions you need to look at similar businesses.
• How about the cash flow statements?  Is most of the cash flow coming from operating activities?
• What does management look like?  Are they experienced?  Have they had success with other companies?
• What about the companies products or services-- are they top notch?  Unique?
• What is the company's marketshare?
• Are there barriers to entry into the company's markets?

I could go on and on here.  There are literally about 200 more questions that could and should be asked-- I am over simplifying here, but the point is that few people know how to look at a company as an investment and hot tips are usually losers.  Next time someone gives you a hot tip ask them some of the above questions-- they more than likely won't have the answers . . .

Most non-professional investors are better served by some form of professional management, and for small investors that usually means mutual funds.  Where a small investor gets "professional" management, instant diversification, and a chance at stock market returns.