(MONEY Magazine) – John Train, a New York City investment adviser and author of the investing bestseller The Money Masters, offers several intriguing stock- and fund-selecting insights in his new book, The Craft of Investing (Harper, $22). Train shared his sage strategies for making money on Wall Street with Money writer Mark Bautz:

Q. What's the most common mistake small investors make?

A. Most ask each other--and any investment swami that's around--"What's the market going to do next?" "Where are interest rates heading?" Pros don't. They know that it's careful study of individual companies that pays off.

Q. You tell investors to pick stocks by "piggybacking" on the thinking of the top pros. Why?

A. It saves research time. Start by finding a money manager or two whose investment styles you agree with--maybe a value investor like Berkshire Hathaway's Warren Buffett or a buy-and-hold manager like Bill Ruane of Sequoia Fund. Request copies of the manager's shareholder reports to follow their latest moves. You can also turn to publications like Portfolio Reports ($475 for 12 reports; 212-777-3330), which lists the stocks a hundred or so top managers are buying.

Q. How should you decide which stocks to buy?

A. Choose a few dozen promising stocks and study them closely. Two important indicators the pros use that individuals often overlook are rising profit margins and a sustained high return on capital relative to competitors. Value Line Investment Survey, found in most libraries, can provide these numbers.

Keep a spreadsheet on each firm. When you're confident you've found a good one, buy a little of its stock. Buy more if all continues to go well.

Q. Is there a proven strategy for picking a stock portfolio?

A. Buy stocks of 20 well-known companies such as UST and H&R Block, whose earnings are growing 15% or more a year. If the growth rate of any of them falls below 15% for a year or two, replace it with another 15% grower. After a number of years of holding these growth stocks, you should do very well.

Q. When do you think individuals should buy funds rather than stocks?

A. In two areas: emerging markets and high-tech growth stocks. The average investor doesn't have the resources to research and buy smaller companies in foreign markets. And the high-tech sector is too arcane for most investors to understand as well as they need to. A superior fund manager can add a great deal of value in both areas.