It is true that there are different times of the year when there is typically more or less activity in the market. For instance, in July and August more families are taking vacations than at any other time of the year. That means less people are paying close attention to the stock market and making investment decisions. Trading volume typically goes down for those months as does all activity on the Internet.

There are times when stock trading volume picks up and that is right after summer and following Christmas. In each of those cases, people go back to work in force and life returns to normal which means people are thinking about their jobs and investments. They have more time to pay attention to the news, surf the web, plan their futures and make stock buying and selling decisions.

You can see from the 10 year Dow Jones chart below though, that in the last 10 years there is really no pattern you can discern for what month or season of the year is better for stocks. 2001 and 2001 look similar with the Dow going down after summer but then going up sharply at the end of the year. But that pattern doesn’t hold for the other years.

In 2003 it was straight up almost the whole year and in 2004 and 2005 it was choppy all year with slight gains being made. 2006 was another good year with one major blip in the middle of the year and then 2007 was straight up until all hell broke loose during the second half.

2008 saw the market go down and keep going down all the way to March of 2009 when things reversed and went up for the rest of the year. Finally, 2010 has been choppy all year with no clear direction being chosen.

What you should take away from this is that rather than try to pick the best season to buy stocks or the best time of day to make your stock buys, you should be concentrating on finding the best stocks to buy right now. If you make good solid stock picks and are willing to hold them as long as the fundamentals remain good, you don’t have to worry about anything else.

Stock investing is a long term endeavor where you need to show patience and consistency. You don’t want to be jumping all over the place with different strategies on when to buy, when not to buy, and other things that are pretty much equivalent to market timing. Make your stock picks based on the fundamentals and any other personal information or opinions you might have. If you do that throughout your investing career, you won’t need to bother thinking about what time of the year it is and whether you should be buying or selling based on that.

People most often get introduced to funds through their 401K plans because most plans do not allow you to buy individual stocks. 401K plans usually only give you a handful of options which are a really conservative fund, a conservative fund, a growth fund, and maybe an even more aggressive growth fund, along with some sort of investment vehicle that just earns interest. Sometimes the 401K plan your company has will allow you to buy stock of that company but that would be the only individual stock you are allowed to buy.

Because people become familiar with funds through their 401K plans, many of them never feel comfortable buying individual stocks. They don’t want to learn how to evaluate companies and do all the work needed to make smart stock decisions. They would rather just put their money in a fund and pay the professional fund manager to do it. However, with the rapid proliferation of stock funds in the last 20 years, there are now thousands of them to choose from! So, picking a fund and doing your homework trying to choose the right one(s) is now just as hard as picking individual stocks. For anyone looking into how to buy a stock fund, the sheer number of funds to choose from can be overwhelming.

To put your money in a fund is not free. After all, the fund manager has to make a living and that is why you have to pay a fee. Some funds have front loaded fees (means you pay a fee up front) or back loaded fees (you pay a fee later on to get out) or some other type of fee. But once you pick a fund, it will often be just as easy to buy online as a stock is. Please see the picture below which is from the E*Trade interface where you can see all it takes is a couple clicks of the mouse to buy the fund PTTAX. All you have to do is put in the amount you want to invest, make a couple clicks and you are done. It is very similar to buying a stock.

The only problem with buying stock funds is that not all funds will be available online. If you go and research different funds by reading magazines, stock newsletters, or searching online, you may become interested in a fund that is not available in your online broker account. The bigger the fund is and the older it is, the more likely you will be able to buy into it online right in your account. But the smaller and newer funds are sometimes not available through your online account and in that case you will have to pick up the phone to make a call.

Many people like to have a combination of stocks and funds to make up their stock investing portfolio. The thinking is that they will have part of their money “managed” though a fund by a professional and then the rest will be comprised of their own stock picks. This is a very personal decision and really depends upon how you feel about stocks and your ability to devote time to picking good ones. Stock funds are great for people who just don’t have the time or desire to learn what they need to in order to become an educated stock investor.

Is it fundamentals?

Is it economic news?

Is it computerized buy and sell programs?

Is it greed and fear?

The answer is that it can be all of the above. Fundamentals play the biggest day to day role in the price of stocks and the price of the market as a whole (Dow Jones Industrial average and NASDAQ). How a company is performing is probably the single most important factor at any one time. If a company is not making money or the prospects for making money in the future look bad, the stock price will probably suffer no matter what happens to the economy. On the other hand, if a company is hot and doing well, the stock price may hold up even in the darkest of economic times.

Of course there are hundreds of variables that are considered “fundamentals”. Analysts will cite any number of things that supports their opinion when they are giving recommendations and these things can get very technical and hard to understand for an average person. However the bottom line is simply if things are going well with a company and the future looks good too, the fundamentals are probably pretty good as well.

The overall economy always is a factor in driving the stock market higher or lower. In a tough economy like we have now with high debt and low jobs, it is hard for the market to go up too much because of people’s uncertainty of the future. It may not have an effect every single day on the direction the market takes but a bad or good economy does make a difference to people on whether they are more willing to buy or sell stocks.

Computerized buy and sell programs are a new thing that have not been around for very long. With the Internet and the market becoming so technologically advanced, much of what was once done manually is now done by computers. This includes trading programs that brokers have in place that are triggered by the market dropping below certain points. Although it doesn’t happen very often, we have seen instances where bad days in the market were made much worse by these computerized programs being triggered and selling off more stocks just because the market dropped below a number. It is truly a new world out their with the Internet and different technologies playing such a big part in the day to day workings of the stock market.

Finally, we come to greed and fear. As I have discussed, stocks trade on fundamentals much of the time. However, it is always people’s perceptions and interpretations of those fundamentals that determines whether a stock is going to go up or down. This means stocks trade on people’s emotions and how they FEEL about a stock or the stock market. When the stock market is going up, people often get greedy and buy it up higher than it deserves to be. Likewise, when the market is in free fall, people panic and sell out of fear. They often overlook everything that logic might dictate and make their decisions on fear and greed alone.

People buy and sell stocks on greed and fear every day and that means they might not be making the best decisions. If you want to be a successful stock investor, it is a good idea to try and stay away from trading on pure emotion and stick to stock market basics. Determining when to buy a stock and when is the right time to sell it should be done logically as best as you can and by assessing what you think the future will bring for the company. Whenever you get greedy you are probably going to make an incorrect trading decision as you most likely will also do if you are full of fear.

Earnings season usually goes on for 2 or 3 weeks during which time many of the big influential companies will all announce their earnings and give a look forward. This is when there can be good and bad surprises that move the market significantly one way or another and set the tone for the immediate future. Some of the companies that are scheduled to announce are JPM, GOOG, C, and many others.

While analysts and investors are always interested in present earnings, it is the future outlook that can be much more important to a stock price and to the market as a whole. For instance, if Google reports great earning this quarter that are way better than anyone imagined, the stock price may still go DOWN if their outlook is not good. It is what the management of these companies say about their businesses and the economy down the line that most people are keenly interested in. This is called “guidance” and everyone will be paying special attention to the guidance that is given.

Earning season is a look into the last quarter and what just happened but it is also a look into the future which I have talked about so many times on this blog. When people are learning how to buy stocks, the one thing they need to understand is that the market is a forward thinking beast. Stock investors generally care more about what is going to happen than what just happened.

Understanding what people are thinking about stocks and how that affects their price is hard for anyone buying stocks for the first time. Sometimes it can be confusing to see a company have disappointing earnings and yet the stock price will go up or conversely good earnings only to see the stock price go down. This is usually because of some news that was given along with the earnings data that people are paying special attention to.

Bad news this earning season will most likely mean the market will go down from here. Personally, I think the chances of bad news is greater than good news as I think the economy is on very shaky terms right now with the government and their out of control spending.

When the stock market is oversold it means that more selling has taken place than the situation warrants. I have spoken many times that the market trades on emotion and when people are in a selling mood, stocks can get oversold. People want out of stocks for personal reasons (usually they are nervous) and that promts them to sell even if their stocks are at a reasonable price when you look at the fundamentals.

An oversold market means that at some point, people are going to come in and buy. This will cause a bounce up that can be either temporary or last longer. When you put things on sale (in this case stocks), people will sooner or later decide they need to take advantage of the low prices.

Oversold markets or stocks can happen in two ways: over a long period of time or very quickly. The market can go down over a long period of time (months and years) and at some point people will jump in because they think it is too low. Bargain prices are what folks are always looking for and they look for them in stocks too.

An oversold situation can take place over mere days as well. This last week of June has seen the market go down about 500 points and that is what is leading experts to say that too much selling has occurred. When the stock market goes down very quickly, it is often because of fear that people are selling. Fear can cause people to sell even though a stock may be a good solid holding.

If you are interested in buying stocks for the first time, an oversold market may be a good time to buy. I am NOT RECOMMENDING anyone buy stock now or next week. I am not a professional and when and how to buy stocks is for you to decide. I am merely explaining what it means when the market is oversold and that we may get a bounce early next week after people come back from their July 4th holiday.

Before you take the advice in any stock newsletter, you should become familiar with the source and do as much research as you can to find out if it is reliable. Remember, the saying goes that you get what you pay for and when you are getting a free newsletter, well remember that the price is free.

The main thing I use stock newsletters for is to get stock ideas and stock picks. There are a lot of stocks out there and it is good to find out what some experts are focusing on. However, when I do get some information from a newsletter, I always try to do as much research myself to see if it is accurate before I act. If the newsletter is all opinion, then there is not much you can do but over time, you will get an idea of who the person behind the newsletter is and whether they know their stuff.

So far I have come up with the following newsletters that I get in my email periodically. Information from all of them is free although you can pay for a more in depth stock market analysis from several of them if you choose:

1) Jim Jubak’s Picks (100% FREE) – MSN money analyst who has started his own website and gives bi-weekly analysis of the market and stocks that interest him. I read everything that Mr. Jubak writes as he is a conservative investor who thoroughly explains all his buys and sells. I have actually made money following his advice.

2) Wall Street Survivor (100% FREE with a paid upgrade option) – This is the premier stock simulation platform on the Internet and it is free to sign up and manage your own portfolio of virtual dollars. Great for all beginners and anyone else who wants to learn how to trade stocks. They will also send you periodic emails with some stock market analysis from some of their writers (free).

3) Morningstar (100% FREE with a paid upgrade option) - This is another great site for stock analysis and information that is free to sign up for and you will get periodic newsletters from them with stock news. In addition to the newsletter, you will be able to get more daily stock news and insights on their website for free everyday.

The interesting thing about graphs is that they can show almost anything you want them to and you can interpret them in many ways. With the graph above, you can see the up and down daily movement of the Dow Jones for one month and clearly see that overall, it is going nowhere. However, if you show a graph of a 1 year period like the one below, things look much different and the sideways movement at the very end almost seems insignificant when compared to the whole graph.

There are some stock analysts that make their living by just  analyzing graphs. They look for breakouts either in the up direction or down direction and use those as a signal to buy or sell. The problem is that you can choose any specific period and it may distort the graph into looking like something is happening when it is really not. Some analysts are skilled at looking for breakout patterns and signals but most are not.

If you look at the 1 year chart above, you can see the long upward trend through 2009 and the first 4 months of 2010. At that point, the chart goes down and really appears like it is still going down right now. But you can take any smaller part of that graph and when viewed by itself, it may appear that a breakout up or down is happening.

A breakout is when a stock (or the market as a whole) breaks through a trend line. You can see what looks like a break to the downside starting in May 2010 when the Dow stopped going up and suddenly went down. So far the graph has leveled off some but it has yet to break to the upside.

Anyone who is learning how to buy stocks may get confused when they hear analysts talking about trend lines and break outs. Most stock pickers make their analysis based on things like a companies prospects, product line, costs, management, and other fundamental things like that. But when you find an expert who just talks about graphs, keep in mind that they will often make a prediction based on a graph of a specific time period. If you were to shorten or lenghthen that time period, you might find that the graph becomes less convincing.

If you read any of this blog you will note that I am pessimistic about the stock market most of the time. At least at this time, I think there are a lot of problems in the US and in the world that can really damage enthusiasm for stocks. Anyone wanting to learn how to buy stocks and begin their investing career should go very slowly right now if I were advising them.

Europe is in big trouble as we all know and now there is a new oil spill predicament in the Gulf. Washington and Barack Obama are taking increasing heat from all sides and it looks like it is becoming one big mess for everyone. Who knows how it will end but it won’t be pretty.

Even if company profits are good in the coming months, people still don’t have jobs and the overall mood of the nation is negative. That’s what I’m seeing and hearing anyway. Washington continues to spend and give away money like they can print it (which unfortunately they can) and that will not be good for inflation or anything else.

Is there anything good really going on right now? Home prices remain depressed, people remain out of work, gas prices are high for the summer travel season, and people are angry and ready to vote out politicians in November.

I know none of those things directly influences the stock market but they do influence people’s desire to spend and to invest in stocks. I think the probability is that the economic environment is going to get worse before it gets better. Stock prices will remain under pressure and if you are going to be buying stocks for the first time, you might wait and get a better price a month or two from now. At least that is what I am doing: waiting.

So, the stock market went down about a 1000 points last week and now it is back up close to where it started. Does this mean that last week was a buying opportunity and what exactly does that mean?

A buying opportunity in the stock market is just what it sounds like: a chance to buy stock(s) at a price that is a good deal. It is a very subjective terms and no two people may agree on when exactly a buying opportunity presents itself.

Here is a chart of the Dow for the last month. You can see the big dip we had last week and how it has come back up:

If you had bought stocks at the exact bottom then you would have a gain now and be quite happy. You might be congratulatiing yourself on a job well done. But what if there is some other crisis in the world tomorrow and the stock market plunges back down to 10,000 or below. Then would you still be happy? Would you still think that you bought during the opportunity?

You see, only someone who can see the future can know whether anytime is truly a “buying opportunity”. And we can see looking back in history as well what were good times to buy and not buy. But since looking back does us no good and seeing the future is something none of us can do, no expert can really know when a buying opportunity presents itself.

Look at the chart below of the Dow over the last 3 years:

You can see that very long line going down for all of 2008 and the beginning of 2009. Now, at any time you could have believed that the market could not possibly go lower and that you were looking at a great buying opportunity. But you would have been wrong as the market kept going down. At the end of 2008 you could have thought that there could be no better time to buy and jumped right in only to be disheartened to see the market go straight down during the beginning of 2009.

So, be careful when you hear the stock experts say that this time or any time is a buying opportunity. They don’t know and they are only guessing. Yes, sometimes it is an educated guess but it is a guess still the same. No one knows what will happen tomorrow, next week, or next month and something bad can materialize that will bring the market or a stock down further. Even though you think that today is the real buying opportunity, there might be a better one around the corner.

Stocks with dividends have been a a favorite of investors for years. It is always great to find a good solid company you like that has a stock price you feel is undervalued along with a nice dividend. That dividend is just icing on the cake and even if your stock stays even, you will make money. It’s like you are being paid just to invest!

Right now, you can find stocks that have dividends over 5% and some that are even over 10%. All a stock like that has to do is to stay even and you would make 10% or more! Some examples are CQP, CMO, CPNO, CODI, CLMT, PTNR, and ALSK which all have dividend yields of around 10% or higher.

So, what is wrong with just buying all the high dividend yielding stocks you can find and using that as your investment strategy?

1) One thing is that in times of trouble, the first step any company take is to decrease or totally do away with the dividend. Although you might be getting that return right now, there is never any guarantee the dividend will stay at that level. Don’t ever believe that any dividend is safe no matter how long the company has paid one.

2)  Additionally, when a company has a high divident yield, you can bet that many of the investors are there just for that and not necessarily for the fundamentals of the company. They are likely to sell their shares of the stock if the dividend goes down. So, if anything negative ever happens to the dividend, the likelihood is that the stock price will go down more due to the dividend investors jumping ship.

3) Buying stocks based only on their dividend yield is great if the stock is able to tread water or go up. But what if it goes down? A 10% dividend doesn’t look so good if you offset it with a 20% loss in the stock price. Whatever dividend you are getting, it will be little consolation in the end if your stock goes down enough that you have a loss. Remember, the reason you are investing in stocks is to make money and that is the ONLY reason. There is no dividend yield that is ever high enough to guarantee a gain and so using the dividend as the only factor in picking stocks is a faulty one.