When people talk about investing, they think of putting money into a company stock and holding it for a long time until they realize a significant gain. From this view, put simply, investing is to "buy and hold." In reality, people also use the term "invest" to describe mid-term and long-term stock acquisition. Mid and long-term investors will study stock fundamentals such as a company's quarterly earnings report, a company's relative strength in its industry sector, new product lines, technological innovation, or new management teams or strategies. They also look at stock charts and use basic technical analysis combined with overall market conditions to determine an entry point. Then, having done all this, they may sit back without worrying too much about short-term market fluctuation.

In another form of trading, short-term traders attempt to buy low and sell high, not focusing as much on company fundamentals as long-term investors tend to do. Short-term traders may seem to care very little about conventional indicators. What they do care about is market volatility, the rising and falling of stock values, for the more ups and downs a stock has, the more money they believe they can make, getting in and out fast to take a quick profit.

An investment portfolio is an investor's collection of investments. A portfolio is a list of the total number of investments an individual investor holds. A diversified portfolio contains assets from a number of different sectors.

Every investor should know that there is a tradeoff between risk and reward: To obtain greater expected returns on investments, one must be willing to take on greater risk.

In investing, intuition also plays an important role. Good intuition comes from experience and sound judgment. When you start making money, you cannot think of yourself as a winner yet because if you lose focus and become greedy, you can lose your money in an instant. More importantly, if you happen to lose money, you cannot let yourself conclude that a single loss makes you a loser. Losing money can be very upsetting, but you need to be consistent and not quit the game easily. Learn to use a loss as a lesson, just as professional traders do, and determine why you lost. In this way, you maximize your chances of becoming a better investor. Talk with your friends and listen closely to trading tips, but in the end, you have to make your own judgments. Believe in yourself. If your next pick ends up being wrong, that may mean you have not yet done sufficient homework on that stock.

After you have identified your goal, you will need to concentrate on specific industry sectors. By diversifying in a couple of different sectors you avoid putting all your eggs into a single basket. Within each sector, choose stocks you want to invest in. Ask yourself questions such as, why do I want to buy this particular stock. Does it have leading-edge products or technologies that I believe are going to fly? Or does the stock follow technical patterns well? In other words, does the stock chart follow a model? Positive responses to these questions can help you feel comfortable in investing in that stock.

If your investments are narrowly focused, for example, if you own stock in just one company or stock in three companies in the same industry or area of the economy, the value of your portfolio can drop sharply if that company or industry produces disappointing returns. But if you own stocks of different-sized companies in different parts of the economy, even if some investments go down in value, others may remain stable or go up. In any case, different types of stocks are not as likely to lose value at the same rate or at the same time.

For example, if all of your stock investments are in large company stocks, it may be time to investigate some smaller company stocks, since they tend to perform differently and rise and fall in value at different times than larger company stocks. In this way, you can offset some of the risks that each investment carries on its own, while enjoying many of the advantages and benefits of each category of investment.