March 11, 2008 - With a seemingly bottomless stock market that has a day or two of great rallies, it's a good time to review what investing is and what it isn't, how to start and stay with an investment, and other essentials that help investors weather this storm.

Credit cards have to be paid. They charge as much as 19%, or more and you're not going to make that kind of money consistently in the stock market. If you make 10% a year, you're doing well. But if your credit card is taking 19% a year....you can do the math.

Savings are important. If you lose your job or have an emergency, you don't want to depend on the stock market to have your money available with a profit just waiting to be taken. In fact, you can almost count on losses if you need the money. Somehow the market knows you need it and will make you pay for breaking one of the "rules". If you save enough to live on for 6 months, you most likely have enough savings.

Diversify your portfolio. Once you've got your "investing money" set aside, make sure you diversify. Your first purchase should be a very large stock that is in many different businesses (GE comes to mind or 3M) or a mutual fund that has many different types of stocks but all very large. They're called large cap mutual funds. That's where you can begin. If you only buy one stock that is narrowly focused, you will ride up and down on the fortunes of that industry or that stock, creating much more volatility than is comfortable. Once you have a fund or a large cap, diversified stock, you can add small amounts of specialized stocks, never having any one stock take up more than 10% of your portfolio.

Buy stocks with growing earnings, not just earnings. In order for a stock to continue moving higher, it has to continually add to earnings. That's what makes a stock worth more: its earnings power. That's what you're buying: the ability to grow profitably. The fewer stocks you own that have only promise, not profits, the better you'll feel, and the better your performance will be.

Volatility comes with the territory. There will be terrible times. Witness the last 6 months and the period between May of 2000 when the Dow Jones Industrial Average was 11257 and the free fall to 7850 in October of 2002. That was painful. Then the market recovered and hit a new high in October of 2007, hitting 14043. We've been going down since then. It will happen again, the good and the bad. It's part of being invested in the stock market.

Keep all of these in mind as you set up your investing programs or tweak what you have. The basics will serve you well in these troubled times.

- Ted Allrich