Question: I have no experience in the stock market, and I'd like to invest some of my money, but I do not have a clue how to go about it. Can you help me or tell me what to do before I make a move that may ruin my life?

Answer: I don't know if I can deal with all the issues that might ruin your life -- but let's look at the financial issues.

If you haven't been involved in the stock market, ask yourself how much can you afford to lose, both financially and temperamentally. Yes, I did say lose. The brokerage community usually asks, ``How much do you want to make?'' A silly question, don't you think?

I know I have no limit to the amount I am willing to make. ``Two million, not a penny more,'' you may say. I don't think so.

After you have decided that you are willing to accept the risk of loss, and how much you are willing to risk (even prudent investment has risk), I would advise starting slowly.

Random Walks Down Wall Street

In the 1960s, Eugene Fama developed a new theory about the market called the Efficient Market Hypothesis. Fama determined that, at any given time, the prices of all securities fully reflect all available information about those securities.

While that doesn't sound so radical, most people who buy and sell stocks do so with the assumption that the stocks they are buying are undervalued and therefore worth more than the purchase price. When you haggle with a car dealer over the price of a new car, you're aiming for a price that's less than retail. When you buy a stock, you're also hoping that other investors have overlooked that stock for some reason, in effect giving you the opportunity to buy for "less than retail."

However, under the Efficient Market Hypothesis, any time you buy and sell securities, you're engaging in a game of chance, not skill. If markets are efficient and current prices always reflect all information, there's no way you'll ever be able to buy a stock at a bargain price.

Fama also asserted that the price movements of a particular stock will not follow any patterns or trends at all. Past price movements cannot be used to predict future price movements. He called this the Random Walk Theory -- stock prices move in an entirely random fashion, and there's no way to ever profit from "inefficiencies" in the price of a stock.

The end results of the Efficient Market Hypothesis and Random Walk Theory are controversial. If you can't predict stock prices, and picking stocks is really a matter of luck, how are we supposed to invest? And what are all those people on Wall Street doing, anyway?

Once you've resigned yourself to never beating the market, the Random Walkers say, you can be satisfied with matching the returns of the overall market. Instead of picking stocks or individual mutual funds, you should invest in the entire stock market. You can do this by investing in index funds, special mutual funds that are designed to allow you to match the returns of the overall market.

Modern Portfolio Theory Made Easy

You can divide the history of investing in the United States into two periods: before and after 1952. That was the year that an economics student at the University of Chicago named Harry Markowitz published his doctoral thesis. His work was the beginning of what is now known as Modern Portfolio Theory. How important was Markowitz's paper? He received a Nobel Prize in economics in 1990 because of his research and its long-lasting effect on how investors approach investing today.

Markowitz starts out with the assumption that all investors would like to avoid risk whenever possible. He defines risk as a standard deviation of expected returns.

Rather than look at risk on an individual security level, Markowitz proposes that you measure the risk of an entire portfolio. When considering a security for your portfolio, don't base your decision on the amount of risk that carries with it. Instead, consider how that security contributes to the overall risk of your portfolio.

Markowitz then considers how all the investments in a portfolio can be expected to move together in price under the same circumstances. This is called "correlation," and it measures how much you can expect different securities or asset classes to change in price relative to each other.

For instance, high fuel prices might be good for oil companies, but bad for airlines who need to buy the fuel. As a result, you might expect that the stocks of companies in these two industries would often move in opposite directions. These two industries have a negative (or low) correlation. You'll get better diversification in your portfolio if you own one airline and one oil company, rather than two oil companies.

When you put all this together, it's entirely possible to build a portfolio that has much higher average return than the level of risk it contains. So when you build a diversified portfolio and spread out your investments by asset class, you're really just managing risk and return.

Dollar Cost Averaging: Put Your Investing on Auto-Pilot

If you've ever asked yourself, "Is this the right time to get into the stock market?" or answered, "The market's too high now. I've missed my chance," you'll soon forget those words after you've learned about the power of dollar-cost averaging.

Here's what dollar-cost averaging means: putting the same amount of money each month into an investment, such as a stock or a mutual fund. That's all.

Why put money in the stock market every month? Because the markets, while having bad days -- even bad years -- tend to go up over time. When you invest a set amount -- say $100 -- your money will buy you fewer shares when the market is high, and more shares when it's low. You'll put dollar cost averaging to work and sleep well every night, knowing that you don't have to track and time the market.

Buying stocks in a falling stock market sounds easy, but most people don't have the stomach to do it. In fact, the stock market is the only place where people seem to get more interested when the prices are being raised. They seem to lose interest when stocks are "on sale."

Dollar-cost averaging is easy to understand, even easier to do, and will have a very positive long-term effect on your portfolio. John Bogle, one of Wall Street's most successful money managers, has said, "As far as investing is concerned"

Understanding Asset Allocation

Asset allocation is the primary tool in the battle to build a diversified portfolio. This is the task of figuring out how much of your portfolio will be invested in different asset classes, such as stocks, bonds, or cash.

Asset allocation has been recognized as a very important part of the process of building a portfolio. In fact, one study has found that your decision as to how you will divide up your portfolio into several classes is more important than the process of choosing the actual stocks, bonds, and funds that you will own.

In developing your asset allocation strategy, you should remember that, generally, the younger you are, the more risk you can afford to take. As you get older and closer to retirement, you'll probably be less interested in the growth of your portfolio and more interested in capital preservation -- protecting the value of your portfolio from any declines. Preserving your portfolio as you reach your desired retirement age becomes more important since a large decline in the value of your holdings can affect your retirement lifestyle, or even make it impossible to retire according to your plans.

One rule of thumb that many experts use is to subtract your age from 100 to determine the percentage of investments to invest in stocks. If you're 45, then you might put together a portfolio that's 55 percent stocks and 45 percent bonds and cash.

Most full-service brokerage firms maintain a suggested asset allocation for their customers. The firm's chief investment strategist determines the optimal percentage of a typical portfolio that should be invested in particular asset classes at any time, and updates the asset allocation strategy on a regular basis. There are also advisors who recommend a portfolio that's always invested 100 percent in stocks, on the theory that this asset class delivers the best return.

The Importance of Diversification

Diversification means building a portfolio that includes securities from different asset classes. Since bonds tend to do well when stocks don't, you could construct a portfolio that includes a certain percentage of stocks and bonds. This helps ensure that at least a portion of your holdings is always doing well.

Another way to diversify is to buy securities in the same asset class that are not affected by the same variables. For instance, entertainment companies, utilities, grocery stores, and airlines are completely different businesses. Depending on the country's economy, one or more of these industries might tend to perform better than the others. If you build a portfolio that includes securities from a number of sectors, chances are that one or more would always be doing better than average.

When you diversify, you try to ensure that at any given time, the value of some of your holdings might be down, and some might be up, but overall you're doing fine. The trick is to find securities that don't have tendencies to increase or decrease in price at the same time.

The trade-off for the balancing of risk and return in a diversified portfolio is that your overall return might be somewhat lower than you could get in an undiversified portfolio. However, along the way, a diversified portfolio will have less volatility, and steadier returns.

Diversification does not eliminate risk, however. It is merely a tool that can reduce the risk you face with your investments.

THERE ARE TIMES when investing looks like such a sure thing that limiting your rewards with any sort of defensive strategy seems foolish. But venturing into the markets fully exposed is like giving up your health insurance policy to pay for a family hiking trip -- one slip, and you're done for.

As we discussed in Time vs. Risk, the longer you have to invest, the more the clock will make up for the inevitable short-term losses. But these three classic defensive strategies are still crucial if you want to maximize your gains while limiting your risk.

Diversification
The single best way to protect yourself from a meltdown in one stock or industry is to spread your risk across several different investments. The more diversified your portfolio is, the less any one stock can hurt you by blowing up.

If you've got the time and energy, you can create your own diversified portfolio. But it will mean keeping track of at least 20 different stocks or bonds at once -- a daunting task, to say the least. A much easier solution is to buy a range of mutual funds and leave the diversification worries up to professional management. As we discuss in depth in our Mutual Fund section, by purchasing a fund that invests in large, blue-chip companies, another that looks for smaller growth companies

Risk and Return

Sure, you'd like to make a fortune in the markets -- who wouldn't? The first thing you need to understand, before you commit even a dollar to a portfolio or begin surfing investing Websites, is that it's impossible to realize a return on any investment without facing a certain degree of risk.

According to Webster's, risk is the "possibility of loss or injury." In investing, risk is the chance you take that the returns on a particular investment may vary. That's another way of saying that there are no sure things when you're investing.

No matter what you decide to do with your savings and investments, your money will always face some risk. You could stash your dollars under your mattress or in a cookie jar, but then you'd face the risk of losing it all if your house burned possibly less dollars in real terms than when you started. Investing in stocks, bonds, or mutual funds carries risks of varying degrees.

The second fact you need to face is that in order to receive an increased return from your investment portfolio, you need to accept an increased amount of risk. Keeping your money in a savings account reduces your risk, but it also reduces your potential reward.

While risk in your portfolio may be unavoidable, it is manageable. The riddle of controlling risk and return is that you need to maximize the returns and minimize the risk. When you do this, you ensure that you'll make enough on your investments, with an acceptable amount of risk.

So, what constitutes acceptable risk? It's different for every person. A good rule of thumb followed by many investors is that you shouldn't wake up in the middle of the night worrying about your portfolio. If your investments are causing you too much anxiety, it's time to reconsider how you're investing, and bail out of those securities that are giving you insomnia in favor of investments that are a little less painful. When you find your own comfort zone, you'll know your personal risk tolerance -- the amount of risk you are willing to tolerate in order to achieve your financial goals.

When it comes to your long-term financial future though, the biggest risk of all may simply be to do nothing. If you don't invest for retirement, or for the college education of your children, or to help meet your personal financial goals, then you're most likely guaranteed a future of just scraping by.

Over the last month, we significantly upped our fair value estimates for some of the largest companies in the global equity markets, namely the multi-industry conglomerates General Electric (NYSE:GE), Siemens (NYSE:SI), and ABB Ltd. (NYSE:ABB). In terms of size, these companies rank 2, 42, and 164, respectively, in terms of market cap on the global equity stage. The stocks have soundly trounced the global equity indexes over the last 12 months with ABB and Siemens rocketing up 112% and 96%, respectively, compared with 30% for the MSCI World Index. GE has turned in a 27% total return, a respectable rise for the second-largest company in the world by market cap.

Despite the runup, we think the stocks still offer attractive value to investors. What's going on? We have identified four key factors among our industrial infrastructure suppliers that are fueling substantially higher cash flows and improved financial results: 1) productivity benefits from business restructuring; 2) a favorable sales growth outlook due to massive investment in global industrial infrastructure; 3) rising financial returns as management decisions are increasingly driven by return on invested capital, and 4) relatively new management teams who have taken a fresh look at the strategic positioning of their businesses. In this article, we examine these factors and make the case that restructuring actions coupled with favorable macro trends will boost returns on investment at global
industrial infrastructure companies and drive above-average stock price returns for equity investors.

Industrial Infrastructure Buildout Fueling Sales and Earnings Growth
Our three industrial infrastructure stocks all boast market-leading positions producing industrial capital goods for fossil fuel power generation, and electrical power

U.S. stocks are at record levels. Earnings season is under way, with many expecting a modest rise in corporate profits. Unemployment is very low. So far problems with housing haven't infected the rest of the economy, which seems poised to bounce back from slow growth in the first quarter.

So what is there to worry about? Plenty. No matter how wonderful things look, the good times won't last forever. Even as most market observers remain bullish, we asked them what could derail this bull market. Stocks could keep setting records for months or even years, but it pays for investors to know what dangers are lurking out there. This Five for the Money lists the five biggest threats to the stock market rally.

1. Earnings

Will any stocks and sectors step up to the plate to push the market even higher? Investors are closely watching corporate earnings for clues.

Earnings season began this month and so far it's not clear whether corporate profits will keep pace with expectations. Expect a lot of volatility in the market as big

WASHINGTON (AP) -- Fast-food waitress Fawn Townsend of Raleigh, N.C., knows exactly what she is going to do if her salary goes up with Tuesday's increase in the federal minimum wage: start saving for a car so she can find a second job to make ends meet.

"My goal personally is to get a vehicle so I can independently go back and forth to work and maybe pick up extra work so I can have that extra income, because minimum wage is not cutting it," said Townsend, who is 24 and single.

"Being a single person, you can't pay all your bills with one minimum wage job."

Many lawmakers, along with advocates for low-wage workers, are celebrating the first increase in the federal minimum wage in a decade. Yet many acknowledge that raising it from $5.15 an hour to $5.85 will provide only meager help for some of the lowest paid workers.

About 1.7 million people made $5.15 or less in 2006, according to the Labor Department's Bureau of Labor Statistics.

"The reality for a minimum wage worker is that every penny makes a difference because low-wage workers make the choice between putting food on the table and