| An investor can use a number of criteria when | | | | How has the company performed so far? Is the |
| determining a sector from which to select | | | | company growing regularly, from year to year? |
| prospective stocks. However, it is important to do | | | | How much cash does the company have available? |
| your own sector research to avoid becoming trapped | | | | Having cash available details the company's ability to |
| by "professionals" who have vested interests in the | | | | pay its bills and generally can determine how well |
| sector they are promoting. So, ask yourself, is the | | | | managed the company is. Look at financial |
| stock in a sector that you think will do well? What | | | | statements that are required by law to be filed with |
| are your reasons for thinking this? Answer those | | | | the SEC. |
| questions with careful research before selecting | | | | Look at the volatility of the share price. Have there |
| stocks within the sector for prospective investment. | | | | been wild fluctuations? Compare charts over different |
| P/E (profits/earning) ratios are most helpful as a | | | | periods. |
| prospective tool when comparing stocks within the | | | | Finally, determine if the prospective company is |
| same sector. Stocks competing within the same | | | | geared for quick gains or as a long-term investment. |
| sector have similar expenses and expectations. With | | | | Answering this question may have to do with the |
| the P/E ratio the general rule of thumb is the lower | | | | type of investor you are personally. |
| the ratio the sooner stock prices are expected to | | | | Once you've done the research you should be able |
| rise. The P/E ratio represents the stock valuation of | | | | to determine why you want to select a stock for |
| the company. | | | | investment. You can invest with confidence, knowing |
| Now that you've selected some companies you wish | | | | that you have the research to back up your |
| to research further, you should be able to answer | | | | prospects. The better-informed investor makes |
| the following questions: | | | | better decisions. |