by Daniel Xiao Wang

Created on: February 07, 2009

As scary as the stock market is these days it remains the single best place to grow your money over the long-term. In fact, a market like this has proven in the past to be present the ideal conditions in which to create a great deal of wealth. It is markets like this one that millionaires and billionaires are born from.

To add to the inherent fear of investing in a market like this where it is not uncommon to hear about 100+ point losses in a single day is the fear that every new investor has when getting started in the stock market. The stock market may seem like just one great gamble, complete with the excitement and fear of any gambling experience.

Seemingly hundreds of questions tug at your mind when first you consider investing. How much should I invest? Where should I invest? Is this safe?

There is a simple, effective strategy that addresses all of these issues, fears, and concerns. It is called dollar cost averaging and works through a systematic investment into mutual funds or exchange traded funds.

It sounds more complicated than it is. Here's how it works:

The most important step is to decide that you are, from this moment on, an investor. You must commit to making a monthly investment no matter what Kramer is saying on Mad Money, no matter what the pundits on Wall Street tell you. This is perhaps the most difficult step in the system.

Step two is to pick the funds that you would like to invest in. Yes, this is even easier than step one. Here's why: You are not going to be searching through thousands of securities, looking for one that might perform well and make you millions. Your goal is to find a fund that has produced relatively consistent returns to its investors.

This is easier than you might initially believe. A search on discount investment websites like sharebuilder.com will give you performance data on funds and will even make simple recommendations. And to make things easier there is a basic, popular fund that is very well diversified and you will have no problem investing inthe Spider. Look for this exchange traded fund (ETF) under the ticker SPY.

The Spider is a basket of the entire S&P 500 it is very well diversified and the most popular ETF in existence today. Shop around and find something that you like. (What's the difference between mutual funds and ETFs

Now choose a discount broker. You could have done this sooner, it doesn't much matter. Sharebuilder is excellent and cost effective, but if you like another company go with them.

Now comes the secret trick. The one that will dispel your anxieties and help you deal with timing problems. Choose a dollar amount that you can invest monthly, set up your discount broker to deduct this amount from your account at specific intervals and directly invest it into your chosen fund.

Every time the money is transferred you will buy shares, regardless of the cost. Sometimes, when the share price is high, you will get fewer shares. Other times when the share price is low you will get more shares.

After setting it up stop worrying and leave it alone. Don't change it, don't think about it, and don't check in to see how it is doing. You've established a system and laid out your plan now let it work for you.

This system will help you overcome the two fears of jumping into a volatile market and investing for the first time. The fact that you are spreading out your investment over certain intervals makes the market volatility less of a problem. Committing small amounts at a time regularly makes this a lower pressure option than dumping all your money at once and hoping you made the right choice. With a fund you also achieve diversification and added protections for your money.

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