The Dow Jones Industrial Average has turned in five straight years

of double-digit returns, and many of the broader market indices have been

setting records, as well. So, investment success is there for the taking, right?

Actually, it’s not quite that simple.

All the attention paid to the skyrocketing Dow tends to obscure the fact

that a great many stocks have actually declined over the past few years. And

these aren’t just wildly speculative companies. In 1999, for example, the list of

companies whose stocks were down included names such as Coca-Cola,

Gillette, Xerox and Pfizer.

The fact is that nobody _ not even so-called “market experts” _ can

consistently and accurately predict the stock market’s winners and losers. That’s

why the really smart investors have thrown away their crystal balls. Instead,

they’ve succeeded by following these basic investment guidelines:

• Base your portfolio on a clear set of investment

objectives _ It’s hard to achieve investment success by

simply throwing together a collection of stocks, bonds and mutual funds. Before

you build your portfolio, ask yourself these questions: What are your

long-term goals? What’s your tolerance for risk? How long do you plan on

investing? Once you have the answers, you’ll be able to create a portfolio designed

to meet your individual needs.

• Diversify _ Diversification may

be the oldest _ and wisest _ rule of investing. The more diversified you are,

the more you will cushion yourself against losses affecting just one type of

investment. Plus, by having your investment dollars in many different

categories, you’ll be able to take advantage of

multiple growth opportunities.

• Avoid big risks _ As a general

rule, the greater the risk incurred by a specific investment, the greater the

potential reward. The trick is to find those investments whose risk level is

appropriate for you. In evaluating risk, take a long-term perspective. Historically,

high quality securities have rebounded after severe market losses, while

low-quality securities sometimes never do.

Also decide how much risk you are willing to accept. It’s not at all

unusual for the stock market to drop 10 percent in any given year. If your $1,000

investment temporarily drops to $900, you won’t like it _ but you can probably

overcome it. However, it you lose half your money on a risky investment, then

that investment will have to double in price for you to break even. That could

happen, but it’s a lot to hope for.

• Don’t “over-adjust” your

portfolio _ It’s a good idea to periodically

re-evaluate your investment portfolio to make sure it’s still aligned with

your needs and goals, both of which can change over time. But you’ll need

to avoid the temptation to over-adjust your portfolio. Constantly buying and

selling securities may eventually result in significant taxes and fees, which

means you’ll have less to invest and your money will grow more slowly.

Of course, there are other general investment guidelines out there. But

if you can follow the basic ones listed here, you’re well on your way toward

becoming a successful investor.

CHRIS BRUNTZ is an investment representative for Edward Jones

financial services. His office is located at 111 1/2 E. North Bend Way, North Bend.

He can be reached at (425) 831-5757.