Diversification

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  Spread your risk through diversification by buying a smattering of stocks across the spectrum--large cap, mid-cap and small cap companies. Minimize risk as you approach retirement by buying into large cap stocks since mid-and small caps bear higher risk. Your portfolio must include diverse industry sectors which insulates you from cyclical swings. Further, include emerging economies in your investment strategy--this will help insulate your portfolio from economic boom and busts by exposing you to different economic climates.
  
  

Time Value of Money

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  A sum of $1,000 in your pocket today is worth more than $1,000 received at a later date, given that you can put your money--an interest bearing instrument--to work right away. The earlier you begin investing in life, the more your money will grow in value. Invest aggressively in your 30s, moderately in mid-life, and conservatively toward retirement.
  
  

How to Pick a Stock

• Focus on fundamentals. All listed companies have a copy of the annual report on their website. Read about the company's business, market, and strategy. Key indicators of financial health are revenue, earnings, profit margin, total capital, investments, return on investment, return on invested capital, liabilities, market share, market/customer growth, trend in stock price, price-to-earnings ratio, and debt-to-equity ratio. You can obtain financial data online free of cost from sites such as Yahoo! company profile. You could also subscribe to reports from research firms like Hoover's and Zacks.
  But numbers alone don't tell the whole story. You need to evaluate other factors such as management capabilities, reputation, innovation, and ethics.
  
  

Basic Rules

• "Put all your eggs in one basket and watch that basket," wrote Mark Twain. Whether or not you agree with Twain on diversification, you cannot overlook the all-important investment advice: Watch your basket, whatever you put into it. Here are a few more basic rules:
  First, watch for hidden fees and penalties (such as exit loads for mutual funds). Second, be rational, not emotional. Sometimes you have to go against the herd and that's not easy. And, third, the fundamental rule of investing is to buy low, sell high.
  In the end, all investing tips come down to these three basic rules.
  
  

Risk Profile

• Know your limit when it comes to risk. Be conservative in placing stop-loss orders (instructions to your broker to sell when a stock hits a particular price), and cautious in day trading. Always ask yourself before you invest: Up to how much am I willing to lose? This will guide you toward your optimum level of tolerance to risk.