Ask TheStreet: Target Practice

Moreover, many of the truly sketchy valuation methods of the Internet bubble -- remember "price to page views?" -- have been abandoned. So, however imprecise the valuation methods may be, at least they are tried and true.

Once the appropriate price of the stock is determined, analysts can offer a target as to where it will be in the future if nothing changed. Price targets are usually set for 12 months in research reports, but some brokerage houses will go longer, to 18 months. The length of time should be spelled out in the report, along with clear definitions for the ratings like buy, sell or hold (and that's a whole other can of worms!).

It's worth mentioning that the analyst community has certainly cleaned up its act since the bubble days. In April 2003, the SEC reached a $1.4 billion global settlement with 10 of the top U.S. investment firms designed to straighten out the faulty research problem on Wall Street.

Baseball and Barry Bonds, meanwhile, are still engaging in business as usual.

What do you think of services where people with a limited budget invest based on dollar amount and buy stocks over time? Is this the best way for long-term investors? Thanks, A.J.

The process you're referring to is called dollar cost averaging, which can be an effective way to leverage your investments. By legging into a stock on a set schedule, instead of jumping in all at once, it smoothes out the investing process and saves investors from kicking themselves if things don't go as planned.

Dollar cost averaging is the process of investing regularly through automatic investments in order to accumulate your investments over time, regardless of share price. Using this technique means investors will buy more shares when prices are low and fewer shares are bought when prices are high. Some services, like Sharebuilder.com, allow you to buy partial shares of stocks.

Saving up your money and jumping into a stock all at once could yield you a big pay day if you time it right. But, as they say, timing is everything. And if the timing is off, it will definitely be hard for a person with a limited budget to recover from a big blow. So, a slow and steady outlook may be best for cautious investors.

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