You'll also want to try to strike the right balance between stocks that produce growth and stocks and other investments that provide value. From an investing perspective, growth is the increasing value of an investment over time. Stocks of companies that reinvest their profits rather than paying them out as dividends are considered growth investments. So are stocks of young, fast growing companies.
A popular indicator of a stock's growth potential is its price-to-earnings ratio, or P/E. Calculated by dividing a stock's current share price by its earnings per share,
the P/E — or multiple — can help you gauge the price of a stock in relation to its earnings. For instance, a stock with a P/E of 15 is trading at a price 15 times higher than its earnings.
While a low P/E may be a sign that a company's earnings are down and it is a poor investment risk, it may also indicate that a company is undervalued by the market because its stock price doesn't reflect its earnings potential. These are called value stocks,
since their relatively low prices can make them a good value for investors — provided a company can turn itself around or is poised to expand.
You'll also want to look at the price and earnings of a stock in relation to its net asset value,
or book value — a company's net assets divided by its number of outstanding shares and bonds. This information, which you can find in the reports of research companies that analyze stock investments or in the company's annual report,
can help you gauge how much debt a company is carrying. Too much debt can limit growth potential.
It can be smart to have both value and growth stocks in your portfolio, since they can both produce strong results — or falter — but rarely at the same time.
Don Kittell
Don Kittell explains how many stocks you'll need to be diversified.
Studies have shown that a well-diversified stock portfolio should contain roughly thirty stocks: In an all-equity portfolio, the maximum benefits of diversification are reached when the portfolio contains thirty different companies' stocks. Do you have to own that many? Apparently not. Other studies indicate that most of the benefits of diversification can be achieved from portfolios containing twelve to eighteen stocks. I would certainly feel secure with eighteen, but others may want a broader spread.
While a low P/E may be a sign that a company's earnings are down and it is a poor investment risk, it may also indicate that a company is 
You'll also want to look at the price and earnings of a stock in relation to its 
Don Kittell