Stock Investing Pt. 2 Do your homework

The most important step before putting your money on the line in an investment is to know what you are investing in. This is important in every investment from real estate, to stocks. What the research is called is due diligence, and this is looking at the available information about your investment. Luckily with stocks the SEC (Securities and Exchange Commission) require public companies (companies with stock listed on an exchange) to publish information about their business. The SEC was created after the great depression to protect us the little investors. Some of the more prominent and useful peaces of information are the balance sheet, income statement and statement of cash flow. The balance sheet is made up of assets (all the items that the business own, what they owe to other people, and what the owners or stock holders have). The income statement shows revenues and expenses and whether the business is profitable or not. And the cash flow statement shows where the cash in the business came from or was spent, there are three categories, operating cash flows, investing cash flows, and financing cash flows. You can find these http://www.sec.gov/edgar.shtml or a site like www.finance.yahoo.com. The SEC site will have the most in depth information look at the 10-k (annual reports) and 10-q (quarterly report).The other sites will also have the same information available, but also some other useful tools available to you.