From The New York Times:

EVERYBODY'S BUSINESS
Want to Be a Fairly Good Investor? Follow the Paw Prints
By BEN STEIN

Published: February 27, 2005

YOUR humble servant grew up as the son of two brilliant economists. I studied economics at Columbia University under some big names in economics, including C. Lowell Harriss. When I was in law school at Yale, I took classes in finance in the graduate school of economics under geniuses like James Tobin, later a Nobel Prize winner, and Henry C. Wallich, inventor of the Fed Model for when stocks or bonds are overpriced. None of these people, however, taught me to be a great investor.

I have been a stockholder of Berkshire Hathaway, Warren Buffett's company, for more than 20 years, and I have done well with the stock. But even reading Mr. Buffett's famous annual letters to stockholders did not teach me to be a great investor.

For a number of years my screenplay agent was a successful investor named George Diskant. I have not seen him for years, but I hear that he is rich. Even he did not teach me to be a great investor.

I also read Peter L. Bernstein's "Capital Ideas," probably the best book about investing I have ever read - besides my own, of course, written with Philip DeMuth. Even that did not make me a great investor.

I even spent years writing for Barron's about financial fraud, often with severe results for the companies I wrote about, and financial salvation for people who read the articles in time to avoid disaster. Nor did that make me into a great investor.

The fact is that I am not a great investor even now, at least in the sense that I can consistently or even often beat the broad market indexes in any meaningful way. But here comes the important part: hardly anyone is a great investor.

If you don't count a very few hedge fund managers - very, very few - as well as Mr. Buffett and a tiny handful of other professional investment managers, the people who can beat the broad market indexes consistently are like hen's teeth.

But if I follow a pattern of buying very broad indexes, and then dipping my toe into various other corners of the market where the action is, I do well enough to sleep at night, occasionally with a smile on my face, and I do much better than I did any other way. If I hit for singles, I do a lot better in the long run than I would do by swinging for the fences, and so does everyone else - or almost everyone else.

In fact, that is the primary lesson of Mr. Bernstein's "Capital Ideas" and it comes to mind this month for a special reason. I, your humble servant, am a frequent panelist and guest on television programs that talk about finance. I happened to be sitting at Morton's restaurant in Beverly Hills a few days ago with Mr. DeMuth and with another financial adviser for whom I have high esteem, Raymond J. Lucia (for whom - full disclosure - I am about to give a speech or two urging people to save for retirement).

Ray and Phil said something like this to me: "You know there are not a lot of shows on TV that actually teach the viewer how to be a better investor. There is a lot of stock picking and predicting what can't be predicted, but there is not a lot that tells the ordinary Joe or Jane how to save for retirement."

Ray and Phil were right. And they will keep being right.

The basic advice for being a better investor is so commonplace, and the rationale for it so complex, that it may not make for great TV drama to preach it endlessly as if it were an old Anacin commercial. But if followed over a long period, it is life-changing, so I'll give it to you now in the shortest imaginable form. Then, when I feel like it later in the year, I'll go into more detail:

Save consistently, and save as much as you can. When you save money, you are saving yourself.

Once you have a pot - or as Ray calls it, "a bucket" - of liquid assets to tide you over a few rough months, move into exchange-traded funds based on broad market benchmarks. These can include the Standard & Poor's 500-stock index of domestic shares; Morgan Stanley Capital International indexes like the EAFE, for big companies in Europe and the Asia-Pacific region, or its benchmark index for emerging markets; broader indexes like the Wilshire 5000, to capture smaller stocks' returns; or large, very diversified managed funds like Legg Mason Value Trust or Fidelity Contrafund.

Or invest in funds similar to these through variable annuities. These annuities let the returns grow tax-free. But first, check the fees and make sure you know what the fees mean. Fees for variable annuities can seem high, but when you know what they are for - certain insurance and capital preservation features, mainly - they look far more reasonable. (Again, disclosure: I am honorary chairman of the National Retirement Planning Coalition, and one of the sponsors, along with medical and actuarial associations, is the association of companies that sell variable annuities.)

Leaven these investments in a very broad bond market index, like the Lehman Aggregate Bond index, and add some inflation-protected bonds. When you are young, you need have very little of this. When you grow older, you should have an ever-larger percentage of your savings in these assets, which tend to fluctuate less than stocks. This preserves your capital as you become less able to replenish losses.

Add to these investments consistently, and with as much money as you can. To paraphrase an old charitable solicitation, "Save till it hurts."

Unless it's the most dire of emergencies, don't withdraw these savings and spend them. Let compound interest work for you by leaving your money invested.

Do not try to beat the markets by speculating on commodities or high-tech stocks. An exception may be commodities embedded in broad-based funds like the iShares Goldman Sachs Natural Resources Index. But never bet on an individual high-tech stock you may have heard touted by someone at your health club. When the siren song starts to waft toward you, lash yourself to the mast of broad-market investing.

Buy a German shorthaired pointer or, better yet, rescue one. That's the breed that won the Westminster Kennel Club Dog Show this year. I have owned them, or they have owned me, for 23 years, and they are the best investments I have ever made.

These investing ideas are basic. They will not make you a George Soros or a Jim Rogers. But they will keep you from throwing yourself off a tall building in bad times. They will, over time, make you a lot of money, too, even though they seem like little, cautious steps. Think small and you will grow big, money wise. And don't forget the hound.