When choosing stocks, keep these five "truths" in mind:

Truth #1 - Stock prices follow earnings. This may be the most important simple truth about investing. Yes, I know the relationship between earnings and stock prices can get out of whack occasionally, such as it is today in the Internet sector. Nevertheless, over time, stock prices follow earnings. If you claim to be a long-term investor, you need to own stocks with rising profit streams.

Truth #2 - The market will eventually demand revenue growth from a company. Companies can "shrink their way to greatness" in the short run by boosting profits by cutting costs. However, you cannot cut costs forever. Every company eventually must show revenue growth if profits are to move measurably higher over the long term. Don't ignore revenue growth when evaluating companies.

Truth #3 - Wall Street always pays a premium for liquidity. A stock's liquidity refers to the number of shares outstanding and the number of shares traded. Wall Street likes stocks with deep trading markets, where shares may be bought and sold without having a big impact on the stock price. If you are considering two companies, one tiebreaker is liquidity. All things equal, you'll be better off in the stock that offers greater liquidity.

Truth #4 - Dividends DO matter over the long run. Currently, investors, for the most part, don't give a hoot about dividends. That's a shame since dividends, historically, have mattered greatly to a portfolio's total-return potential. When choosing stocks, don't completely ignore dividend-growth potential. Indeed, during rocky market periods, the dividend return may be the only return you see.

Truth #5 - Past performance is not necessarily indicative of future results, but it may be the best barometer you have. I know it's possible for good companies to go south. Still, if you are considering investing in a quality industry leader or a third-tier player, choose the industry leader. Yes, it is a safer play, and the industry leader may not always be the best performer in any given year. However, a large part of being a successful investor is keeping your money in play over a long period of time. You keep you money in play by avoiding blow-ups. Industry leaders are much less apt to blow up on you than third-tier, speculative companies.