Perhaps the most difficult investment question of them all is "how do I choose a particular company to invest in?

The issue is that no one answer fits all. But there are several key steps you can take to finding the right stocks for you.

The first step is to define what your goals are, in other words, what do you plan to do with the money you invested. For parents with young children, for example, it may mean sending their children to college. For others, it may mean creating a nestegg for retirement. Before you poke around on the Web to research particular companies, you need to figure out your financial goals first.

The second step you need to take is determine your risk-reward tolerance. This is a fancy term for figuring out the extent to which you can sleep at night when your investments go up and down in value. Some investors want a guarantee that they won't lose any money. They should stay away from investing in stocks because stock investors can lose all of their money. Other investors don't mind the possibility of losing part of their money but are still quite conservative. Often such investors will invest only in blue chip companies, such as General Electric, which have been around for a long time and are large, stable businesses. Then there are those investors who are willing to lose it all in return for a higher reward. Such investors may invest in high technology companies that face many technological and other hurdles to making it big but if they do, offer huge rewards to investors.

Once you figure out these two steps, you need to figure out how your next investment fits into the portfolio of stocks you already own. For example, if you own a diversified set of blue chip companies and want the possibility of higher returns, you may want to consider a smaller technology company. But if you don't own any stock or if your stock is already concentrated in small technology shares, you may want to consider another type of investment.

After this step, you need to adopt a long-term investment philosophy and stick with it. For example, some academic studies have found that buying stocks with low price-to-earnings ratios generate high long-term returns, a philosophy known as value investing. Some pundits suggest buying stocks that are enjoying fast increases in earnings and sales. In the end, it's probably more important to be consistent in your investment philosophy rather than picking a particular investment strategy.

Based on the above factors, you can now begin to do your homework. Many personal finance Web sites, such as Yahoo!, MSN, and Quicken, offer detailed fundamental information about companies, including stock selection tools in which you input criteria important to you and the tools will find a selection of stocks that find them.

For example, if you are a value investor, you can ask the stock selection tool to find stocks with a price-to-earnings ratio below 14, for example. You can also specify which industries the stocks are in, whether the company has been profitable and scores of other factors.

In the end, most investors should strive for a diversified portfolio of stocks in order to offset losing companies with winners.