* It’s hard to say when the market or a particular stock is “high” or “low”.

* Commissions and or bid/ask spreads eat away at your profits when you trade frequently, especially on small transactions.

* In the last 40 years, the market returned about

11.3% annually. If you were fully invested the whole time, but got out completely for the 40 best months, your annual return would’ve dropped to 2.7%. If you miss the big moves, it hurts, and no one really knows when they’re coming.

But, buy and hold doesn’t work for most people because most people, for one reason or another can’t seem to stay in the game! Here are some reasons why:

* The market can easily move sideways or down for periods of 10 years – buy-and-holders can lose money for 10 years! Think of a retired household whose living expenses are paid from savings. Do you think this might impact one’s life style?

* Bear markets may seem insignificant when you have only $10,000 invested, but what about a hard earned portfolio of $500,000. Every time the market falls 5% you’ve lost $25,000. Now, imagine the market correcting by 30% over several months – you’ve now lost $150,000. The pressure to sell out and save your remaining $350,000 will be very difficult to resist.

* Most people give up and sell out very near the bottom. That’s what emotions will do for you. It’s very easy to say you’ll ride out a bear market while the market is soaring, but almost impossible when the market is crashing and all you hear from the media is how the market is going down to zero.

This is the problem with

Buy and Hold. It’s easy to stick with when the market is rising but impossible when the market is falling. If you think you’re different and can ride out a bear market you’d better think again about how emotionally painful it will really be.

Despite battling the odds of uncertainty, most money managers are practicing some form of market timing. But the truth is that most timers are trying to flatten out the risk and volatility in a portfolio, and are willing to trade some returns for stability.

strategy among individual investors. Many choose this method because of its simplicity – buying a stock and holding onto it, no matter how much the price rises or falls.

Buy-and-hold investors usually sell their stocks only when they have reached a certain goal such as making enough money for retirement, a college fund, or a house. Investors can buy a stock, hold onto it, and not have to worry about the right time to sell. Two additional benefits to the buy and hold strategy are that trading commissions can be reduced and taxes can be reduced or deferred by buying and selling less and holding longer.

The “buy and hold” approach to investing in stocks rests upon the assumption that in the long term (over the course of, say, 10 or more years) stock prices will go up, but the average investor doesn’t know what will happen tomorrow. Historical data from the past 40 years supports this claim. The logic behind

the idea is that in a capitalist society the economy will keep expanding, so profits will keep growing and both stock prices and stock dividends will increase as a result. There may be short term fluctuations, due to business cycles or rising inflation, but in the long term these will be smoothed out and the market as a whole will rise.

Market timing is an alternative to buying and holding. Market timers believe that it is possible to predict when the market, or certain stocks, will rise and fall. Does it therefore make sense to buy when the markets are low and to sell when they are high in order to maximize profits?

Turn off the talking heads on TV and put down the latest investment periodical. These formats are informative if taken lightly and in the proper amount but they are more interested in selling subscriptions and driving ratings than they are about giving quality advice. The movements generated by the advice of those in the television and print media are not always the best for the investor. News only sells when it gets our attention and unfortunately that hardly ever equates to good news.

* Good (even great) well-established companies do not always make great stocks.

It seems counterintuitive that a well-established, well-known company would not automatically make a great stock to hold. Good, even great companies can and do falter as well as the lesser-known companies. In fact many of the well established companies get stale and have a hard time growing beyond the boundaries in which they have typically always existed. Too much exposure to too many of these giants can have a less than stellar effect upon your portfolio.

* This one could really be 2 in 1.

Do not put more than 10% of your money in your companies stock or within any 1 individual stock. The first part deals with most investors who utilize their 401(k) and have company stock within the plan. If the plan allows it and does not require you to hold a set minimum in stock make sure you have allocated your 401(k) holdings to limit your exposure to your company’s stock. In addition, within any portfolio (look at the holdings in the aggregate and not strictly by account) make sure that you have any individual stock position limited to no more than 10% of your holdings. We all think that the stock we have loaded up on is a high flyer and

because of their business model or sales or new product coming on the market it is bound to double in price. Every stock you purchase was from someone else who wanted out. Do not expose yourself to excessive risk with excessive positions. Remember some of the big stock blunders of recent years, Enron, WorldCom, K-Mart…the list is long and everyone had a reason to have 30, 50 even 70 or 80% of their holdings within stocks like these.

As I have stated on a very frequent basis, and will continue to do so at every opportunity, investing is risking and should be approached with care. One should never avoid investing but should approach it with diligence and understanding. The lack of knowledge of basics is one of the biggest hurdles I see most investors struggle with in regards to what they are looking for and what they expect. Balance out expectations with reality and see how well they fit. Get a good understanding of investing basics, especially including the emotional side to investing and utilize sound logic and reasoning. Chasing returns on the up side or running away from them on the down side never accomplishes either race. Utilizing logic and emotional balance as well as good asset class selection and you should find a much better fit. You and your portfolio will be much better served and more comfortable as a result.

investor’s road to success may be the high road while another’s may be the low road. But common to both investors is basic principles that are true to form no matter which road an investor finds himself taking. Below is a listing of some of these basic principles that may lead an individual along the road to successful investing.

Formalize your goals. As with the achievement of any goal, commitment to the goal is half the battle. Formalize your commitment to attaining your goals by writing them down, both short-term and long-term. Follow your progress by updating them at least annually. How else will you know if you are actually going to attain your goals?

* Invest early as possible.

Procrastination is an investor’s worst enemy. Though there is no perfect or ideal time to start investing now may be the best time of all.

* Invest in what you understand.

If you do not understand how an investment works you will not fully understand the risks associated with that investment. Is it really worth it placing your hard-earned money in this type of investment?

* Consider the impact of inflation and taxes.

Inflation and taxes erode an investor’s purchasing power. The consideration of investments that minimize the impact of these two forces may be key in meeting your goals.

* Your portfolio is for you and you alone.

The design and formulation of your portfolio is based on your goals, time horizon and risk tolerance. Understand that what may work for your friend, cousin, or co-worker may not work for you because one size does not fit all.

* A basket of eggs is better than just one.

Diversification of your investment assets may bring the positive benefits of reduced risk and stable returns to your investment portfolio basket. Mutual funds are a cost efficient way to invest while at the same time reaping the benefits of diversification.

* Use time, not timing when investing.

Trying to correctly time the ups and downs of

the market is a risky, if not impossible, task. Most investors will fare far better by keeping their investment assets in the market the entire time. It is time in the market, not timing the market.

* The old team player may be better than a young hotshot.

Try to avoid the temptation of investing in the new “hotshot” investment that may lose its luster quickly. Seek investments with solid track records that will benefit you more over the long run.

* Know when to cut your losses.

Many investors do not know when to get out of an investment. If your investment selection is heading south and most likely won’t return to previous form, face the music and consider getting out before your lumps get too big.