by Paul Lalley

Created on: June 22, 2008   Last Updated: June 23, 2008

Do you think your broker knows more about the prospects of a given stock than you do? Stock brokers don't have a clue. Want proof? Watch any stock-picker show and for every talking head that says buy Microsoft there's another warning us to sell. And these are highly-paid experts. On TV!

The fact is, your interests and those of your broker are not in sync. Your broker only makes money when s/he buys or sells something hopefully on your say-so. But, it may not be a good time to buy or sell. Even so, expect a call from your broker urging to make some kind of move.

So, how hard is it to growth wealth in the stock market? Not very. The New York Stock Exchange has delivered between 9% and 10% yearly. How's your broker been doing after that 2% commission?

In nut shell, here's what you need to know about making money long-term in stocks and bonds.

1. Diversify. Don't put all your eggs in one basket.
This one's a no brainer, but a lot of investors just starting out don't have a couple of hundred thou to diversify a portfolio. No sweat. That's what mutual finds are for.

Mutual funds provide instant diversification by investing in a collection of several hundred stocks. And mutuals come in a wide variety of flavors. There's more risk in sector funds that buy companies within an industry sector like health care or defense. Other types of mutuals include large cap value funds funds that look for undervalued large cap companies the big companies that have fallen out of favor on the trading floor.

Whatever your investing preferences, there's a mutual fund that fits your style and goals. To learn more, pick up the phone and start talking to a mutual fund representative or do your own research. The web is knee-deep in investment advice.

One thing never pay a load fund. A load fund charges you for the privilege of investing in it. Some are front end, some are back end, some are on a sliding scale anyway, keep it simple. Go no load. They're better than lots of load funds.

2. Watch fees and expenses.
The more you have, the more they take. Mutuals and brokers take their cut. Index mutual funds tend to have the lowest expenses because there's no expensive "research" or trading. Sector funds and other highly researched funds may cost you a point or two, which may not sound like munch until you have $200,000 and that 1% service charge came to $2,000!. Check the fee schedule of any mutual you buy. Anything at 1% or below is good. Anything higher than 3% is a total rip-off.

3. Buy and Hold
Every

• 1
• 2
• Next Page >>