Traditionally the stock market has performed well enough for many to use all or part of their profits to enjoy a more comfortable retirement, purchase a vacation home, acquire a new car. If you pick the right stock or mutual fund the sky is the limit for what you can earn. There are many stories about people who pick the right stock and have rode it all the way to financial independence. imagine buying stocks in a company like Microsoft, Google, Wal-Mart, in their infancy and hanging on to them for 20 or 30 years! Wow, you just hit the lottery. That’s America my friend. The perfect embodiment of the principle of risk and reward. The other side of the coin cannot be dismissed. I’m sure that for every investor in APPLE there are many more who invested in companies like Enron or Lehman brothers. However, that is the beauty of living in a free enterprise system like America, where everyone can make it big utilizing their skills, luck, hutzpah, drive, determination, or whatever you want to name it. We have the freedom to chose our own path; right or wrong, good or bad. Isn’t that grand.

What should you do with money you may want to invest in a stock portfolio? How can you get the most return with as little risk as possible? My suggestion is to DIVERSIFY. Take a hypothetical example of $25000. You might wan to risk 1/3 of the money into a high risk stock. You may lose a lot but you may also gain tremendously if the stock rises. These types of stocks have a tendency to soar and to subsequently decline.. The key here is to buy these stocks when they are in the declining stage and sell when you feel you have made enough profit or when you cannot stand to see them continue to fall. A word of caution here. Know when to get out. Do not get too greedy and do not hang on until the stock is worthless waiting for a return that may never come. Set your limits on the high end and the low end. This way you won’t get burned. AND NEVER LOOK BACK. Do not torture yourself with “what if” scenarios and beat yourself up over them. Deal in the here and now, and move forward. That is not to say you couldn’t reinvest in a stock that you sold too low or got out of too soon. Never limit yourself

The next 1/3 of my hypothetical portfolio should be an investment in Mutual funds. Pick a fund that has a average degree of risk and look at its history. That information is readily available online. There are many advantages to investing in a mutual fund as opposed to a single stock. Mutual funds invest in a group of companies as compared to a single stock, The most obvious advantage here is that if one company in your mutual fund does not perform well the others may help it along. Therefore, minimizing your loss. However, it can weaken your gain. You have to be comfortable with that also.

That last recommendation that I would make is to take the last 1/3 and invest it in Blue Chip stocks. These are stable time tested companies that have been around for many years and offer steady if not spectacular returns. Some examples of these types of stacks are Coca Cola, U.S. Steel, Dow Chemical, just to name a few.

In short, do your homework, risk only what your comfortable losing, have an exit strategy and stick to it. You could hit it big.