Buy an overvalued stock during a bubble market and you can get clobbered when the bubble bursts. For example, investors who overloaded on tech darlings during the Internet bubble suffered when the Nasdaq stock exchange fell more than 70 percent from its peak in March 2000.

On the other hand, selling undervalued holdings can be a mistake if the market rebounds. Investors who sold out at the market's recent bottom on Oct. 9, 2002, and sat on the sidelines have since missed a 57 percent rebound in the S&P 500.

Knowing the right time to buy and sell stocks is one of the most difficult aspects of investing in the market.

Analytical tools can help investors evaluate stocks for appropriate entry and exit points, including online rating systems offered by MSN Money and Morningstar.

"What people do is let their emotions get the best of them when they buy and sell," said Pat Dorsey, director of equity research at Morningstar, the investment service based in Chicago. "People often make the mistake of buying stocks only after they go up and not when they are bargains. There is a quote from Warren Buffett that Americans like to buy everything on sale except stocks."

One problem is that many investors feel out of their element when making money decisions. A recent USA Today/CNN /Gallup Poll found that 23 percent of investors didn't feel comfortable as managers of their own investments, and only 27 percent paid significant attention to such matters.

When investors do pay attention, their decisions too often aren't based on methodical analysis.

"Most people are willy-nilly with their approach," said Chuck Carlson, editor of DRIP Investor newsletter in Hammond, Ind. "They follow the trends. They buy what is popular. They listen to a hot tip from friends. They don't do much research. But if you are never sure why you buy anything in the first place, then you can get into trouble. ... You need to take the emotions out of it."

One of Carlson's favorite strategies calls for buying the 10 worst performers in the Dow Jones Industrial Average during the previous year and selling them a year later.

The theory is that these Dow laggards often are blue-chip stocks facing short-term problems that will eventually correct themselves and bounce back.

"It is true contrarian approach of buying stocks that have rebound capability," Carlson said. "It forces you to buy low and hopefully sell high, which is good strategy for investors to follow."