• Most of us have never invested, or only held a single stock or bond in our lifetimes. We haven't really considered the concept of money-making-money to be something that takes place outside of our savings accounts. Financial data looks like hieroglyphics. We think more about cats and dogs than bulls and bears. Okay, so we're clueless, but there are more of us than them. And when it comes to investing, it's easier to get a clue than it may seem. For an overview of the mysterious pastime called "investing," read on.

• You may not actually be able to afford to invest. Even if every market analyst recommends a particular investment, today's cruise to wealth could end up as tomorrow's sinking ship.

1. Use The Motley Fool's budgeting tools to determine whether you're getting in over your head.
2. If you have sizable debts, pay them down before investing. To get them in-check, consult How to Lower Your Credit Card Rates.
3. Do not invest with a credit card! Ask yourself: would you gamble with borrowed money? That's exactly what you'd be doing. The last thing you need is to owe thousands more dollars to a creditor and have nothing to show for it.
4. If now is not the time for you to invest, rest assured that the market will grant you plenty of opportunities in the future.

• As in Vegas, so it goes on the stock market: there's no such thing as a sure bet. However, if you cast a wide net and carefully scrutinize everything you catch, you're likely to find a few winners.

1. Read The Wall Street Journal
   • Whether or not you agree with its editorials, there's arguably no better source for financial information. The Wall Street Journal Online is free.
2. Read The Motley Fool
   • The Motley Fool is a less conventional, but also well respected, source of investing info. Its website is designed for the average investor and based on the idea that most people are qualified to guide their own investments, without the help of financial services.
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3. Read Stockscouter
   • Stockscouter is MSN Money's daily market blog, analyzing the markets and offering investment ideas. Remember, though, to view everything through a critical eye when it comes to stock advice (including this article).
4. Follow the Trends
   • We're not suggesting you refresh your wardrobe every two months, but it's important to be aware of consumer culture if you're going to buy stocks. And while reading financial publications is an important aspect of this, you should also keep an eye out for savvy new products, convenient new services, brilliant new discoveries—anything that seems like a winning idea could make for a winning investment.
5. Use research tools.
   • MSN Money's Stock Research Wizard generates an analysis of a particular stock or ETF in plain English. rather than Financial-ese. All you need to do is input the name or ticker symbol of the stock/ETF!
   • MarketWatch's Mutual Fund Comparison tool allows you to compare the performance and expenses of up to 25 different mutual funds. Again, you just input the symbols and press "enter." For an explanation of the results, see How to Choose a Mutual Fund.
   • Yahoo! Finance's stock quotes are some of the more user-friendly on the web, allowing you to track and compare a full portfolio of different stocks. To learn how to interpret a stock quote, see How to Read the Stock Market

1. • An example of an investment portfolio that's diversified among different sectors would be one that includes stock in clothing companies, pharmaceuticals and agriculture.
2. Invest internationally.
   • It may sound unpatriotic, but if you view the domestic economy as a basket, it makes sense. If the U.S. economy tanks and the Australian economy stays afloat, you'll be in better shape than your neighbor if you've invested in both. Brokerages, including online discount brokerages like E*Trade and Scottrade, give you access to investments in foreign economies.
3. Invest in different sized companies.
   • Individual companies are classified as small-cap, medium-cap, or large-cap. These terms refer to the size of each company, but also roughly indicate the risk involved in investing in them. Large cap companies tend to be more secure investments, but the unpredictability of small-cap companies gives them the potential for higher short-term earnings. Investing in both kinds would theoretically give your portfolio both a solid foundation and exciting potential.
4. Invest in a mutual fund.
   • A mutual fund is a sort of investors' pool. Your money is combined with that of hundreds, or thousands, of other investors and then tied into an array of different securities, depending on the specific mutual fund.
   • The fund may invest in stocks, bonds, money market accounts, futures, currencies, or even other mutual funds, targeting one area of the economy, or spread throughout.
   • Most mutual funds are administered by a fund manager who decides what and when to buy and sell.
   • Even among mutual funds, you can apply other principles of diversification: such as investing in several funds, each of which target different sectors of the economy, or one that targets small cap companies and one that targets large cap ones.
5. Invest in an index. An index fund is a kind of mutual fund that reflects the value of an entire market index.
   • A market index is a kind of Nielsen Ratings for stock markets that tracks the performance of a certain sector of the economy or an individual stock exchange.
   • The NASDAQ Composite Index, for example, tracks the performance of every company that's traded on the NASDAQ stock market.
   • The Fidelity Nasdaq Composite Index Fund owns shares in every one of these 4000+ companies. So, if you buy shares in it, you're investing in the entire NASDAQ market.
6. Consult a stockbroker.
   • Placing your investments in the hands of an expert has both benefits and drawbacks.
   • Your personal broker will advise you on the best investments and sift through stock analyses and market trends, so you don't have to. If you get a good one, he or she will work extremely hard to increase your wealth. Your broker may also provide guidance on taxes and retirement planning.
   • However, you're likely to pay high rates for stock transactions (around $150, as of 2007), as well as extra annual fees and other regular fees.

• You've heard the adage, Don't put all your eggs in one basket. In investment, this rule is called diversification: putting your eggs (dollars) in a number of different baskets (stocks, bonds, money market accounts) in order to minimize risk, while maximizing profit. There are a number of ways to achieve a diversified portfolio.

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• If you're ready to invest, there's an uncomfortably wide range of options at your disposal. Consider the major investment categories in terms of your own lifestyle, financial situation and tolerance for risk.

• When you buy stock in a company, you're not just going along for the ride: you become a part-owner, with your financial destiny tied to that of the company. That's why it's very important to choose wisely. Buying stock is easier and quicker than it's ever been before, but certainly no less risky. If you're a first time investor, you'll want to prepare yourself for the volatile markets before plunging in.

1. Research is especially important when picking stock, because companies vary so much in terms of their histories and prospects. Make sure to not only read publications like the The Wall Street Journal and The Motley Fool, but analyze stocks yourself, using the information in How to Buy Stocks.
2. There are several ways to buy stock. You'll want know the drawbacks and benefits of each before you commit.
   • A full service brokerage like Merrill Lynch or Smith Barney, will give you lots of personal attention, but you'll pay accordingly.
   • Discount brokerages like E*Trade and Scottrade give you the basic tools manage your own stock transactions online. You'll certainly save money (and won't be at the mercy of someone else's advice), but will also need to do a lot more research. If you're a casual investor without a lot of time on your hands, this may not be for you.
   • Through a direct investment plan, you can cut out the brokerage altogether and buy shares directly from the company. The cost per transaction is minimal, as little as $2, but your options are limited to the relatively few companies that offer direct investing. For a comprehensive list of those that do offer direct investment, see Enroll Direct.
3. To learn the exact practical steps you'll need to take when buying stock, see How to Buy Stocks.

• Risk: varies wildly from one to another.

• A mutual fund is a bundle of investments that automatically diversifies your portfolio, in one fell swoop. In theory, mutual funds represent the best combination of baskets in which to invest your "eggs": the ones that will keep your eggs safe, while giving them the room they need to hatch and grow. But that's more or less where the chicken metaphor ends. Here's how it works:

1. You buy shares in a mutual fund, either directly from the company that administers the fund, or through a broker who in turn passes on your money to the company.
2. Your money is combined with those of hundreds, or thousands, of other investors.
3. The pool of money is invested in an array of different securities, depending on the specific mutual fund.
   • The fund may invest in stocks, bonds, money market accounts, futures, currencies, or even other mutual funds, targeting one area of the economy, or spread throughout.
   • Most mutual funds are administered by a fund manager who decides what and when to buy and sell.
4. You have no say in matters of the fund's day-to-day management. However, you may choose to remove all your money from a fund and end your participation.
5. Mutual funds are available from brokers, banks and the companies that administer mutual funds (which are known, appropriately enough, as mutual fund companies).
6. For a complete explanation of mutual funds, see How do Mutual Funds Work.
7. For a guide to choosing and buying shares in a fund, see How to Choose a Mutual Fund.

• Risk: generally lower than individual stocks.

• The index fund is a kind of mutual fund, but unique enough to warrant its own category. As opposed to the typical "managed" fund (guided by a fund manager), an index fund is a kind of passive mutual fund that's barely managed at all. In the name of diversification, the company that administers it simply buys an equal holding of every stock on a certain market index.

1. A market index, such as the Dow Jones Industrial Average, or the S&P 500, is a sample of a particular array of stocks that reflect the performance of a certain sector of the economy or an individual stock exchange.
2. Index funds that invest in the S&P 500 index actually outperform 75% of managed funds.
3. Index funds may be one of the least exciting way to invest, but also one of the least risky. You'll only lose a lot of money if there's an overall market crash or a whole sector of the economy goes kaput.
4. When choosing an index fund, it's most important to research the past and projected performance of the index itself.
   • Major American Market indexes (or, more properly, indices) include the S&P 500, the NASDAQ Composite, the NYSE Composite and the Russell 1000.

• Risk: Fairly low, unless market is unstable.

• You've probably heard radio ads touting gold as a fool-proof investment, but there's no such thing. While sinking your savings into gold can have certain advantages, it also has dangers.

1. Gold has historically kept its value in times when the dollar has been weak or declining. For this reason, it could be a way to buffer your savings against the hazards of inflation.
2. Unlike paper money, gold cannot be created: it has to be mined. This built in scarcity helps it to retain its value.
3. However, gold's value is historically volatile. It fell about 70% in the last two decades of the 20th Century and then quadrupled in value at the beginning of the 21st.
4. When the stock market and/or real estate markets rally, the value of gold may decrease. This is because demand for gold will decline as investors pursue other markets.
5. While gold can sometimes be an effective safe-haven in the short term, it's value has been dwarfed by that of the stock market in the long term. According to the Wall Street Journal, if you had invested $1 in gold in 1969, it would have been worth about $20 by 2006, but $1 invested in the stock market (according to the S&P 500 index) would be worth more than twice that figure.
6. There are several ways to buy gold:
   • You can buy and store actual gold in the form of coins or bullion bars from dealers or the U.S. Mint.
   • You can buy shares in mining stocks.
   • You can invest in a mutual fund that has assets in gold.
   • You can buy shares in a gold-based ETF (Exchange-Traded Fund: a security that's sort of a cross between a mutual fund and a stock).
7. The details can be found at How to Buy Gold.

• Risk: fairly high, historically.

• If you view the stock market as one big, international casino, where you play the right slot and get rich quick, consider investing in the wild and unpredictable futures market.

1. Futures are the riskiest way to invest, but also bear the greatest potential for making a lot of money, with relatively little money down.
2. When you sign a futures contract, you are essentially betting that a given commodity will gain or lose money by a fixed date.
3. The bottom line with futures is that if things go your way, you can make pile of loot—and if things don't go as planned, you could be in debt for years to come.
4. Futures brokers, including discount futures brokers, are listed at Business.com.

• Risk: very high.

• When you purchase a bond, you're essentially granting a small (usually $1000) loan to the government (mainly federal or municipal) or a corporation.

1. You get the promise that your money will be returned in whole, after a set period of time. Only if the issuer goes bankrupt will you lose money.
2. You receive regular interest payments (or, properly speaking, coupon payments). So you essentially sit back and watch the money roll in.
3. Unfortunately, it won't amount to a lot of money unless you own a lot of bonds. The stock market outperforms bonds in the long run.
4. Some drawbacks of investing in bonds include the uncertainty of corporate bonds and the hassle of understanding intricate concepts like yield to maturity.
5. Bonds can be purchased straight from the government at TreasuryDirect.gov, or through a brokerage (including online discount brokerages).

• Risk: low.

• Like most industries, the real estate market rides an infinite cycle of boom and bust. It's crucial to invest cautiously, with lots of research under your belt.

1. There are a number of ways to invest in real estate:
   1. Buy actual property for sale of rent.
   2. Buy stock in real estate companies.
   3. Buy shares in Real Estate Investment Trusts.
      • REITs are publicly traded companies that invest in real estate.
   4. investing in a mutual fund with holdings in real estate
2. If you're interested in renting property out, and don't first consider the associated hassles of being a landlord, you may live to regret it. Have a look at MSN Money's Do you have what it takes to be a landlord?
3. To learn about a community before investing in property there, use Homefair.com's City Profile Report. It includes statistics on the crime rate, per capita income, population and, most importantly, the average sale price for homes.
4. To know more about the different ways invest in real estate, see How to Invest in Real Estate.
5. Actual real estate can be purchased through a realtor, directly from the seller, or from the government.
   • Realtor.com is a national database listing homes for sale, run by the National Association of Realtors.
   • ForSaleByOwners.com is a listings database that allows sellers to post for a flat membership fee, but it's free to buyers.
   • USA.gov is a government-run site that lists government-owned properties available for sale, including homes, commercial buildings and farmland.

• Risk: Low, but only if you weather the cycle long enough to make a worthwhile profit. (This can take many years).

• Every kind of investment has the potential for either gain or loss. But if you invest more than you can afford, or enter particularly risky markets, that potential can turn to either wealth or ruin. Be smart—and careful—and you can create a better future for yourself and your family.