Pay attention to the market trend

Most stocks follow the market trend. When you're investing in a stock that's become exceedingly unpopular, it stands to reason that you've got a better shot of making money when the trend is up than when it's flat or down.

Know the reasons for the stock's decline

You may think you know a company because it has a big name and has been around for a long time, but that alone is hardly insurance against its near-term demise. Before you snap up any shares, you need to do your homework and find out why the stock has declined. Is it just bad press over a minor mistake, or is the company's whole business model no longer valid?

Look at the fundamentals

If you're putting your hard-earned money into a troubled enterprise, you owe it to yourself to examine some of the key ratios that indicate the company's underlying strength. These include revenue and profit trends, return on equity, debt-to-equity ratios, and dividend payout ratio.

Check out the stock's PEG ratio

One of the most well-known barometers of the value of a stock is its price to earnings, or P/E ratio. This compares the price of the stock to the company's per-share earnings. An even better indicator of the value is a stock's PEG, or price to earnings growth rate. The PEG incorporates analysts' estimate of the company's future prospects to its current stock price. A PEG ratio below one means the stock may be underpriced compared to how well it will perform going forward.

Look at the stock's technical indicators

Technical analysts examine a stock's chart of price movements and changes in volume of trading over time to try to estimate which way the stock price will move in the future. While not infallible, some key technical indicators can help you gauge whether the time is right to buy a given stock.

If all of these considerations sound complicated, that's probably a good thing if it makes you hesitate. If you're not dissuaded by the relative complexity, consider three more tips:

• Don't invest too much.

• Set an intended investment amount and stick to it.

• Seek the help of an investment professional.