I have a bit of extra money laying around and would like to invest in stocks...

The Dow Jones Industrial Average Index (30 blue chip stocks like Ge, GM, MSFT, IBM) hit an all-time high today.
DJ

I would park the money in a short-term CD – you can find the higher interest rates online – for the moment. Then start getting educated. Do you have a wise family elder who can help? The sites like etrade want to make money (YOUR money).

There are books, newslettters, non-credit coursers at community colleges and local high schools (adult ed.) There are also some safe value/growth stock funds at places like Vanguard, Fidelity, Putnam, etc.

Do you have a job where you can start a retirement account? If so, there should be a financial advisor or two there. Remember, if you save $3000/year starting in your 20s, you will be richish in yr retirement yrs; that is better than trying and failing to get rich in middle age.

courses

And check this out;

http://www.fluther.com/disc/672/any-good-investing-tips-for-poor-people/

You can also invest in SPIDRs, which in essence is investing in the whole stock market (I’m probably oversimplifying) or mutual funds, there are a lot of sources to check out mutual funds. I also recommend Bob Brinker’s Money Talk as an excellent resource re mutual funds. Unless you are very knowledgeable, day trading in individual stocks is a great way to lose money fast, in fact, you might make it last longer playing blackjack at a casino.

I would stay away from e-trade to start. They are more expensive on a purchase by purchase basis than other sites you can find. Also, they charge you inactivity fees etc. If you are making a large number of purchases and can really benefit from the analysis that e-trade charges the premium for by all means do so. However, I recommend sites like sharebuilder who don’t hit you up for just letting your money sit where it is for extended periods of time. In short, E-trade is for your day traders not your beginners

Once you have your account set up, put as much money as you can afford to lose into it. keep in mind it takes money to make money, I wouldn’t bother unless I had $10,000 to play with. But keep in mind the stock market is a calculated form of gambling and you should never gamble anything you aren’t willing to lose. And just like gambling there are more and less risky options. Bonds being the least risky, IRAs and Mutual Funds slightly more so, and then of course your stocks being the most risky.

One you have your self set up with your account and have established financial goals its time to start developing a strategy to meet those goals. I abide by the warren buffet investment strategy of buying and holding for significant periods of time (5–10yrs). Once you have determined your investment pool and risk level, I would say start an automatic investment plan ($4 per trade on sharebuilder which is about as low as you can find) in that asset. Say something like $500–1000 per month (5–10% of the total you would like to invest) as an example. You will purchase the same $ amount every month/quarter/week. But depending on how well your stock/fund is doing this $ amt will get you more or less shares. Over time you will mitigate risk via what is called “dollar cost averaging” (http://en.wikipedia.org/wiki/Dollar_cost_averaging).

I suggest you do your homework and develop a strategy that will meet your needs. I have outlined one of many, but it is one of the most basic and a good place to start. Whatever you do, make a gameplan and stick to it. Do not let the emotions caused by the swings in the market affect your judgement. With my strategy, you do not lose if the share price trends downward for a while. In this scenario your are just buying when the shares are on sale and stand to make a return even if the price only gets back up to where it was when you first started purchasing them. Good Luck