Every investor has a set of criteria for investing, even if they do not know it. For example, I had a client who regularly gave me the ticker symbols of companies that he was considering puchasing. After about two months I asked him how he chose the companies that he provided me. He indicated he listened to some fellow on the radio and he would call me when his guru talked about stocks that were priced at about $30. So, my client had the following criteria: stocks that a celebrity picked that were priced at $30.

When I sat down and discussed this with my client he became embarrassed. He never really understood his criteria and when he looked at it rationally, he realized he needed better criteria and a better method.

Each investor has their own secret recipe for adding stocks to their portfolio. There is no one right set of criteria for selecting good stocks. However, there are some very good methods for developing criteria. I will discuss my secret recipe in subsequent posts. For now, I would recommend a few good books which are important to your understanding of stock selection, criteria, and methodologies.

Here is how I would select among the three books. If you want to manage your investments without getting too involved but you want to do a good job, read "Starting and Running a Profitable Investment Club". If you want to read the books that are used in the Universities to teach future investment professionals, read "Investment Policy" and "Stocks for the Long Run".

1) Investment Policy (Paperback) by Charles D. Ellis ISBN: 1556230885

2) Stocks for the Long Run : The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies (Hardcover) by Jeremy J. Siegel (Author) ISBN: 007137048X

3) Starting and Running a Profitable Investment Club: The Official Guide from The National Association of Investors Corporation Revised and Updated (Paperback)by Thomas O'Hara ISBN: 0812930088