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In the investment game, diversification is practically holy writ. In fact it would be very difficult to find someone who doesn't recommend diversification. The idea is quite simple. If you own a combination of stocks, bonds, mutual funds, CDs, money market accounts, treasury bills, etc., your risk is spread out. Presumably, if one of your investments crashes, your overall portfolio will not be greatly damaged.

One of the wonderful things about investing today is that we have so many vehicles for investing, that diversification is simple. You can buy a single mutual fund or exchange traded fund (ETF) and have instant diversification.

Diversificatio n in these vehicles can be broad or narrow. You can follow a single index of stocks like the S&P 500 or the DOW. With these indexes, your portfolio will tend to gain when the greater stock market is gaining and vice-versa. As suggested by the name, for example, the S&P 500 consists of 500 different companies. The DOW Jones fund follows all of the stocks in that index.

You can even buy a fund of funds, a single fund that is made up of a number of different funds. These can be a mix of low to high risk or anything in between. Most funds are relatively low risk, low return vehicles, although funds and ETFs can follow very narrow high risk markets as well.

In today's economic climate, the broad stock market is heading south. There is no general agreement as to how far it will drop before turning around, but it may not be a good time to bet on the broad market with an index of stocks. Instead, one needs to look at what vehicles are likely to weather this economic storm best or even prosper because of it.

I mentioned above that it would be hard to find someone who doesn't recommend diversification. Actually, I lied. Warren Buffett, of Berkshire Hathaway, now the richest man in the world, recommends putting all of your stocks in one basket and then watching that basket. Buffett calls himself a value investor. He is not a trader, buying and selling stocks with every shift in the economic winds. He is a buy and hold kind of guy.

By value, he means companies that are on a solid financial footing but for some reason are undervalued, are selling for less than they're worth. Many of the blue chip stocks are actually overvalued but get bought because they have a certain air about them. Companies with value have cash on hand, little or no debt, excellent leadership, and a valuable product or service.

In a market climate of slow-motion economic

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