We left off in part 1 discussing basic money management and diversification in a portfolio.  Now, we need to explore ways to research and pick individual stocks.  This is a very, very important ingredient to your investing success.  Within any given industry, there will be stocks that thrive while others tank.  It’s your job to pick the former, but it’s sometimes easier said than done.  Thankfully there are plenty of online tools to scrutinize your picks thoroughly. 

    I feel really strongly about the oil industry.  Our nation is hooked on oil and demand is constantly rising,  so I’m going to invest in an oil company or two.  I start with what I know: Exxon Mobil, BP, and Chevron come to mind, so I know of a few companies, but not many.  What I can do is head over to tdameritrade.com, search for the ticker for Exxon Mobil  (XOM), and get a quote.  What I really like about this quote page is that it gives you 3 other companies at the bottom to compare it to.  It has a chart comparing the numbers for XOM with those of Royal Dutch Shell, PetroChina and BP.  This is a good way to get some names of some other players in the field besides what you already know.  You can compare the financials and basic stock information of the four.  One of the stats that is given is the price-to-earnings ratio (p/e ratio).  The p/e ratio is a comparison of the share’s price to the earnings per share.  I won’t go into much detail about it here; if you do a Google search for it you can get a lot of good information about how investors use the p/e to evaluate stocks.  You will see a lot of other financial numbers on the quote page, but don’t let it overwhelm you.  I prefer to let other people sort through the financials. 

Note: The one current downside to using TdAmeritrade is that their charts only go back one year.  For long term charting, I recommend Yahoo or Google’s finance pages.

    My all-time favorite site for stock research is www.fool.com.  There are excellent resources for investors to utilize at the Motley Fool.  They always have awesome and educational articles about investing covering everything from “Is your portfolio ready for a bear market?” to “How to invest like Warren Buffet.”  The articles are great, but there is another feature of the site that is in my mind by far and away the best place to learn and research stocks.

    Motley Fool Caps is an area of the site which is basically a giant stock market simulation where registered players are awarded points for correctly picking whether a stock will outperform or underperform the market.  You can see the comparisons of how many people think the stock will outperform vs. underperform, and read up on the comments of people explaining why they made the pick they did.  There is too much to describe here, but check it out.  It is a good, good place to learn a lot.  One word of caution, though, is that players don’t always have a real stake in their opinions, so you will read some off-the wall and crazy predictions once in a while, but not often. 

    There are a ton of other resources online to help you make informed investment decisions.  It will take some time, but you will discover your favorite places to get information.  In part 3 of this series, we will examine the exciting realm of dividends, and how they can help give your portfolio a boost.