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Welcome Cristien. We're glad you could join us. I think you are doing this exactly right. Start with the basics and then experiment with new avenues as you learn what proves profitable for you.

CAPs feedback is probably not the best place to post basic questions. It is mostly for those who think CAPs is not recognizing their favorite stock or a stock split etc.

Investing Beginners discussion board is a better place for your questions.

http://boards.fool.com/why-im-a-fool-30595501.aspx

To answer your questions--

I want to start by investing in some index funds

That is an excellent plan. Most people should use mutual funds to let the experts pick the stocks while they learn. You will want to pick funds with good performance and low costs (ie low expense ratio, low 12b-1 fees, and no loads). Vanguard's 500 Index Fund (ticker VFINX) is the gold standard that all the others are compared to. A total market fund like VTI can also be a good starting point.

You will want to consider costs when you select your mutual funds. If your account is with a mutual fund company (especially an IRA or Roth IRA), fees are often low, but you may be limited to their mutual funds. Hence large mutual fund families like Vanguard or Fidelity can be best. If you use a discount broker, they often have a list of low fee mutual funds, but charge transaction fees for other mutual funds. Some offer no commissions for ETFs. And low commission makes stocks attractive. A broker allows more choices but best choice depends on the costs of services you plan to use.

As to selecting mutual funds, Morningstar.com is a good place to go. They have excellent data on most mutual funds. You probably want to make an index fund your core investment as you get started. In time you might diversify by adding other funds such as an international fund, a hot sector fund, a growth fund, some would add a REIT. Then gradually add stocks as you learn of good opportunities.

can you tell me how to use CAPS to my advantage in choosing stocks to add to my portfolio?

One of the easy ways is to find some favorite players whose style or performance you admire. You can find their CAPs portfolio by clicking on their underlined name on any discussion board posting. Follow the links to their CAPs portfolio. You can see what they have in the account, and TMF will notify you of any additions or deletions once you select your favorites. Also, CAPs will tell you who is posting comments on a given stock, positive or negative. You can easily look at their CAPs portfolio to see what other stocks they find interesting.

CAPs is mostly for comparing the performance of your stock picks vs the S&P 500. Once you pick seven stocks, TMF rates your performance daily. If you have a positive score, you are beating the S&P 500. Once you can do that consistently, you are ready to begin buying stocks with real money.

There are many sources of stock recommendations. TMF has premium services that make specific recommendations. You get some ideas from questions posted on discussion boards and mentioned in the news or discussed on various TV programs.

In time, you will want to decide if you are a growth investor or a value investor. A value investors needs to figure out what a stock is worth, so you know when it is undervalued. A growth investors wants to identify stocks with good prospects to grow their earnings. Then you can use screening programs on CAPs to find stocks that seem attractive--usually for further research before you invest. There are also various discussion boards where people discuss their favorite stocks.

If you are into stock screens, Mechanical investing is a discussion board to know about. They seem to have hundreds of them--probably one or more that meet your needs (although CAPs lets you design your own screen).

http://boards.fool.com/weekly-trade-ledgers-3182013-30596510...

Value Hounds is one for Value Investors--

http://boards.fool.com/will-cyprus-topple-the-world-good-que...

Foolish Wiki also has several articles you may find of interest. Here is a good place to start with Growth investing--

http://wiki.fool.com/Growth

This is a very large subject. I hope this gets you started. Ask away if any of this requires more explaining or you have more questions.

Welcome to the Fool.
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