Invest Confidently in 6 Easy Steps

Worried about preserving their assets, women tend to invest more conservatively than men -- often too conservatively to amass the amount of money they'll need to see them through a long lifetime. And they often express less confidence than men in their ability to invest. In one study, for example, more than 60% of the women interviewed said they didn't know how a mutual fund worked, versus 41% of men.

But the idea of buying stocks is less intimidating if you realize it's not an all-or-nothing proposition. You don't have to pull all of your money out of bank accounts and put it into high-risk foreign stocks. In fact, by taking the following small steps, you can build a tidy nest egg without leaving your comfort zone.

1. Don't invest until the time is right. Your stock-market investments should be built on a solid foundation of sure things: enough insurance to protect your family, plus several months' worth of expenses tucked securely in a savings account. Only when you have that cushion are you ready to start investing.

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2. Don't risk money you're going to need in five years or less. Anything you want to do, buy or spend money on within that time-a car, a house, or a vacation, for example -- qualifies as a short-term goal. You want to keep that money where it's safe and easy to get your hands on, so stick with a savings account or bank certificate of deposit.

Stocks are riskier investments that are more appropriate for long-term goals that are five years or more in the future. You'll need at least that long to ride out ups and downs in the stock market.

3. Avoid investments that you don't understand or don't feel comfortable with. That doesn't mean you should never take a flier on something that's legitimate but risky. Just don't take big risks with big chunks of your money.

4. Invest small amounts on a regular basis. That way, you get used to the idea of investing, but you don't feel as if you have so much on the line.

In fact, the smartest investing strategy is also the simplest. It's called dollar-cost averaging and it works like this: You invest a fixed amount on a regular schedule, regardless of the price of an investment at any given time. The amount can be $50 a month or $100 or $500 -- whatever fits your budget. One recent study found that the vast majority of Americans said they could save an extra $20 each week without giving up anything of significance. That adds up to more than $1,000 a year -- and that's real money that could be going toward your retirement kitty.

5. Keep all things in proportion. Use this rule of thumb to help you determine what percentage of your long-term investments should be in stocks: Subtract your age from 110, then multiply that figure by 1.25. If you're 30 or under, for instance, 100% of your long-term investments should be in stocks; if you're 40, about 88%; if you're 50, 75%; at 60, just over 60%. That's a guideline, and it assumes you're comfortable taking a fair amount of risk. If those numbers make you nervous, you can always ratchet down your stock investments. But even when you're retired, as much as 50% of your investments should be in the stock market to keep you ahead of inflation.

6. Spread your risk. The easiest way for most people to invest is through mutual funds. These funds pool small amounts of money from thousands of investors and buy dozens of stocks-more than any individual could buy on his or her own. So it's an easy and relatively low-cost way to buy a stake in the stock market and spread your risk among many companies.

The best place to begin is with a mutual fund that invests in the entire market. One such fund, for example, is Vanguard's Total Stock Market Index fund (800-662-7447). To get started, you'll need a minimum investment of $3,000. If you don't have that much right away, set up an automatic monthly deposit into a high-rate online savings account. When you hit the $3,000 mark, transfer the money to the mutual fund. After that, you can set up an automatic investment plan with the fund for as little as $50 per month.

And if you wanted to put, say, 20% of your stock investments in foreign companies, you could purchase Vanguard's Total International Stock Index fund. With those two funds, you'd own the entire world. It doesn't get much simpler than that.

Adapted from Kiplinger's Money Smart Women (Kaplan, $15.95), by Janet Bodnar, deputy editor of Kiplinger's Personal Finance magazine. Available at retail and online bookstores including Amazon.com and Barnesandnoble.com.