When the markets are volatile, it may be a good time to reflect on how you're doing with your investments.  With that in mind, here are three brief tips for you to ponder. 

Tip Number 1:  Know Whether You Are Investing In A Stock or a company.

Many investors simply look for "a good stock" in which to invest.  But. this is often a poor way to approach an investment, because it tends to blur two very different concepts. 

The difference is extremely important.

Investing in a "stock" means that you think the price of the stock will move, for one reason or another. Reading charts, comparing relative valuations, playing momentum, buying options, or guessing the overall movement of the market, are all "playing stocks."

Investing in a company means understanding its business model, the market it serves, the market's growth rate, and, perhaps most importantly, the company's competitive advantage. A core understanding of how the company will increase its shareholder value through increased business is the premise behind buying the stock.

There is nothing intrinsically wrong about either approach. Both have value.

The danger is confusing the two.

For example, when you buy a stock and the price tanks, you've lost. Game over, usually. Take the loss, and go on. When you buy a company, and the price goes down, it's possibly a reason to buy more, especially if your faith in the company is still strong.

If you don't know which approach you are following, the odds are you won't know what to do when the price goes down.

This is probably the single most important lesson in all of investing.

Investors that get into trouble almost always share the same problem: they allowed themselves to get into a position which they later couldn't tolerate. Examples of these include:

• Invested money they should not have, from a personal finance viewpoint
• Used margin when they should not have
• Bought something they didn't understand
• Bought something based on a valid premise, but refused to admit they were wrong later
• Refused to take a loss

All of these problems amount to the same condition: an investor exposed himself to more risk than he could emotionally bear.

This was a common problem in 2000. For three years, investors exposed themselves to risk, sometimes ridiculous levels of risk, and never had to face the jeopardy. Then that risk reared its ugly head and many investors were wondering what happened.

But the risk was always there. Make sure you know what kind of risk you are exposed to, because "Risk Happens!."

The most successful technology stock investments all have one thing in common: the companies became big players as the markets they were in became big.

Would Microsoft have been so successful if PCs had cost $100,000 each? What really made Microsoft so successful was the marketplace it came to dominate. It rode the market's extraordinary growth curve, and exploited their position along the way. Bill Gates and Steve Ballmer are great executives, but make no mistake: it was the PC market explosion that made Microsoft the giant it is.

To find the next Microsoft, and that's what it's all about, you should first try to find the next major trend. By thinking on the highest level about where technology is going, and how an individual company will fit in that trend, you stand the best chance of reaping the highest rewards.

Robert V. Green