How much financial bloodshed is necessary before we realize that there is no safe and easy shortcut to investment success? When do we learn that most of our mistakes involve greed, fear, or unrealistic expectations about what we own? Eventually, successful investors begin to allocate assets in a goal directed manner by adopting a realistic Investment Strategy... an ongoing security selection and monitoring process that is guided by realistic expectations, selection rules, and management guidelines. If you are thinking of trying a strategy for a year to see if it works, you're due for another smack up alongside the head! Viable Investment Strategies transcend cycles, not years, and viable Equity Investment Strategies consider three disciplined activities, the first of which is Selection. Most familiar strategies ignore one of the others.

How should an investor determine what stocks to buy, and when to buy them? Will Rogers summed it up: "Only buy stocks that go up. If they aren't going to go up, don't buy them." Many have misread this tongue-in-cheek observation and joined the "Buy (anything) High" club. I've found that the "Buy Value Stocks Low (er)" approach works better. A Google search produces a variety of criteria that help to identify Value Stocks, the standards being low Price to Book Value, low P/E ratios, and other "fundamentals". But you would be surprised how the definitions can vary, and how few include the word "Quality". In the late 90's, it was rumored that a well-known Value Fund Manager was asked why he wasn't buying dot-coms, IPOs, etc. When he said that they didn't qualify as Value Stocks, he was told to change his definition... or else.

How do we create a confidence building Stock Selection Universe? Simply operating on blind faith with one of the common definitions may be too simplistic, particularly since many of the numbers originate from the subject companies. Also, some of the figures may be difficult to obtain quickly, and it is essential not to get bogged down in endless research. Here are five filters you can use to come up with a selection universe of higher quality companies, and you can obtain all of the data inexpensively from the same source:

1. An S & P Rating of B+ or Better. Standard & Poor's is a major financial data provider to the investment community, and its "Earnings and Dividend Rankings for Common Stocks" combine many fundamental and qualitative factors into a letter ranking that speaks only to the financial viability of the rated companies. Potential market performance (a guessing game anyway) is not a consideration. B+ and above ratings are considered Investment Grade. Anything rated lower adds an element of unnecessary speculation to your portfolio. A staff of thousands does your research for you.

2. A History of Profitability. Although it should seem obvious, buying stock in a company that has a history of profitable operations is less risky than acquiring shares in an unproven, or start-up entity. Profitable operations adapt more readily to changes in markets, economies, and business growth opportunities. They are more likely to produce profit opportunities for you quickly.

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