Fool's School
Invest Only When Ready

We've long recommended investing in healthy, growing companies via the stock market, but truth be told, it's not right for everyone. Some just aren't ready to invest. "Active" investing, where you select your own stocks, isn't rocket science, but it does require some skill, discipline and time.

You're probably ready for stocks when you:

• Understand that the value of your holdings will go up and down, and that not every investment will make you money.

• Are willing to do a little math now and then.

• Won't need any of the money you invest for at least five years.

• Can tell the difference between a balance sheet and an income statement and know where to find them.

• Know that understanding a business is much more important than following stock prices each day.

• Have a long-term investment horizon and can hang on to a stock for years.

• Know to compare your performance to a benchmark such as the S&P 500 index.

And you're probably ready to invest in a given company when you:

• Can name its major products, services and competitors.

• Can list reasons why you're buying it and what would make you sell it.

• Have a good handle on its competitive advantages.

• Have studied its financial statements and crunched some numbers.

• Have multiple sources of information about it, such as press releases, online forums and your investment club.

• Are willing to study its four earnings reports each year.

Don't let this list discourage you. Most people have never been taught much about investing. Becoming a successful investor is achievable and can even be fun and rewarding. Best of all, there are many resources available to help you. It's never too early (or late!) to start learning about investing. Click over to www.fool.com and www.betterinvesting. org for more guidance.

For those not ready, simple index funds, such as those based on the S&P 500, can be great.