Excerpt from The Total Package, Chapter 4

During the first three years of the 21st Century, investors have endured a severe bear market for stocks, terrible acts of terrorism, and various corporate-related scandals. However, we American's are an extremely resilient group of patriots, and in the long run, our financial markets will prove equally resilient. Make no mistake about it, America's passion for investing is alive and well, and this passion to invest is sure to continue in many other parts of the world. It seems as if everywhere we turn today, someone has investment advice or an opinion on the stock market, retirement planning, IRAs, the economy, or even a new “hot” stock tip. The Internet has further fueled interest in global markets by making widely available the financial and investment information that once only professionals could access. Investing on-line has also played a major role in the long-term interest and participation of consumers in the financial markets. Here are some things you need to know as you prepare to invest:

—Stocks—

The stock of a corporation is simply an ownership position in that company. For instance, if you owned 1,000 shares of Microsoft you would actually own part of Microsoft, but a very small percentage of the corporation as a whole. There are thousands of stocks to choose from.

Stocks generally fall into one of two basic categories: growth or value. Growth stock investors are generally more aggressive; they pay greater attention to share price momentum and are willing to take on greater risk. Value investors, on the other hand, concern themselves more with something called a “price to earnings ratio” (P/E ratio). The P/E ratio is a stock valuation measurement that compares the earnings of a company to its stock price. In general, the lower the P/E ratio is, the greater the “value” investors are receiving for their money.

Selecting individual stocks to include in your portfolio is a serious matter. Done correctly, it is a time-consuming task involving considerable research. However, a vast amount of necessary information is available today; and if you wish to invest the time to do adequate research, stock-picking can be a rewarding experience.

Before you log on to your Internet provider and begin to conduct your research or possibly even invest on-line, let’s take a step back and review some basic investing principles...

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