This article comes with the DOW, NASDAQ and S&P500; all at record highs. If you had bought an index mutual fund investing in the S&P500;, then that investment should be up 14.3% since January 1, 1997! The NASDAQ is up, by comparison, 7.6%. Much of the gain in the NASDAQ is in the big names like Intel and Microsoft so the remainder is up much less. As such, many mutual funds that go for smaller, growth stocks are down or up just a bit. A portfolio with good diversity might be up 5 to 10% at this juncture. To answer Wayman�s question of " what performance can one expect?" I�d have to say the historical performance of the market over very long periods of time is over 10% but there have been ten year periods where people actually lost money so the stock market is not a sure thing. Stock market investing sure looks good when prices are at a peak, but tossing all your money in now can be a good way to be disappointed.

With that said, how should one start investing in the stock market today? Dollar cost averaging is the only way to invest now. Say you have $12,000 to invest. Then take $1000 each month and invest it. If the market keeps going up, you make money, but not as much as if you put it all in today. On the other hand, if the market goes down 10% on a correction like we just had, you can buy more or even invest all the funds remaining at the bargain basement prices (you hope). What dollar cost averaging does is make you money if the market keeps going up and prevents you from investing all your funds at a high just before a correction that might take a year or two to recover from.

What funds do you buy? Well, that is a tough question. Go to some advisors and they put you into load funds that give them a commission of up to 6.5%. They tell you things like "this fund returned 7.8% last year verse the 4% you got on your savings account" and you are hooked! What they don�t tell you is there are no load funds available that returned 23% last year with far less risk and without the commissions. I think it is irresponsible to advise people to invest in something without knowing their full financial situation. Have they paid off all credit card loans? Do they get matching funds for investing in work programs? What is their tolerance to risk? How old are they and when do they want to retire? If you have $10,000 or more to invest now, I�d recommend going to a "fee only financial advisor". You pay them up front for advice and nothing more. Be very sure up front that this is the case before working with them. I believe you can call Charles Schwab and they will give you some names near you to talk with.

What if you are just starting out? It certainly does not make sense to pay $400 to someone to learn how to invest $50 a month. My advice it to look for a very low annual fee (0.2% or less) no load "extended market index fund". Some funds have a minimum, but wave this for IRA investments which is a really good way to start as your investment grows tax deferred and you might be able to deduct the amount invested from your income thus lowering your annual tax bill. Use Yahoo or your favorite search engine to find "extended market index fund" or just call any of the big, no load mutual fund families.

If your place of employment has a 401k plan available, I strongly suggest full participation. I put ten percent of my GROSS paycheck into my 401k and my company matches with an additional four percent giving me a 40% return just for participating! The mutual funds available to me are not all as good as what I can find on my own, but there is an index fund and some good growth funds that compare favorably once you consider the matching and the fact that my gross income is lowered 10% saving me over 40% of that 10% in state and federal taxes. The deal is just too good to pass up.

Remember "Dollar Cost Average", "No Load Mutual Funds", "Fee Only Advisors" and "IRA/401(k) plans" and you should be well on your way to sound investing. Also remember that 30 year Government bonds pay almost seven percent and are sure things (as long as you hold them for 30 years) and the stock market might average ten percent a year even after it is up almost 100% in the last 3 years so be very careful of anyone promising returns above ten percent. IF the returns are so good, ask them "why don�t you get a bank loan on your house at 8% and buy this yourself if it is such a good thing?"

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