Back in May, I wrote about my experience so far in the equity markets and what I've learned about stocks, investor psychology, and business. Over the years, my experience has revealed that the best wealth-creating stocks in the marketplace tend to offer investors a great "package," rather than any one catalyst for investment.

I view all equity securities as high-risk. I realize that some businesses are much larger than others, but I always keep in the back of my mind that absolutely anything can happen to a stock. If a well-established company like Procter & Gamble can lose half its value on the stock market in just three months (it did in the first quarter of 2000), then I think it's important to think of stocks as high-risk securities.

I also like to distinguish between investing and speculating. Most individual investors like to both speculate and invest in the stock market. The pension and mutual funds people own fall under the investing category, while speculating consists of buying and selling individual stocks in order to make money from the stock market itself.

If you are a speculator in the stock market, you do have to act differently than if you are an investor. I find it useful to think about what you want from the stock market and adjust the risk parameters in your portfolio accordingly.

If I were to create a speculative equity portfolio right now, I'd try to own a basket of stocks with underlying businesses that offer that special package. Quite likely, these stocks would be considered on the Street as "special situation" opportunities. You can't really quantify what a "special situation" stock is, but they are clearly businesses that are successful because they have a niche in the marketplace. They are doing something in an industry that others are not.

From an investment point of view, these companies also offer more than one reason to buy the stock. Perhaps a company has great industry fundamentals, strong pricing power combined with a new technology, the right capitalization and the right valuation. As I've said before, in my experience, the most attractive stocks do tend to jump out at you when they come across your desk. Look for the special situation opportunity that offers a package full of reasons to buy the stock. A stock that presents more than one catalyst for investment is much more likely to be successful over the rest of stocks in the equity universe.