When it comes to managing your money, you basically have two choices: You can do things the easy way or you can do them the hard way.

The hard way is figuring out how to proceed on your own, assuming that the challenges you face and the goals you aspire to are unique to your personal circumstances and therefore you alone must guide your destiny. The easy way is using the example and wisdom of others to inform your actions, hoping to learn from their mistakes and benefit from their successes.

Be Humble: When you do not know a thing, to allow that you do not know it - this is knowledge (Confucius). Investing is a big bet on an unknowable future. The mark of wisdom is accepting just how unknowable it is. Granted, that's not easy. Our brains are built to think the future will be like the near past. And we're too ready to act on the predictions of pundits, who are no more clued in than we are about what lies ahead. Being humble in the face of uncertainty keeps you from costly mistakes. You won't jump on yesterday's bandwagon. And before you invest, you'll be more likely to ask a key question: "What if I'm wrong?"

Take Calculated Risks: He that is overcautious will accomplish little (Friedrich von Schiller). The returns you get are proportionate to the risk you take. This is a fundamental law of the markets. It's why five-year CDs typically pay more than six-month ones and why you're disappointed if your emerging markets fund does no better than its stodgy blue-chip stablemate. History unequivocally supports this "no free lunch" principle. Going back to 1926, stocks (high risk) have paid more than government bonds (medium risk), which in turn have beaten low-risk Treasury bills. Among many, many other things, this law suggests:

* To earn returns high enough to build true wealth, you have to put some of your money in risky assets like stocks - the only investment to handily beat inflation over time.

* If a financial salesperson tries to tell you his product offers a high return with no risk, get that claim in writing. Then send it and his business card to the SEC.

Mix It Up: It is the part of a wise man to keep himself today for tomorrow and not to venture all his eggs in one basket (Miguel de Cervantes). Nothing can break the law of risk and reward, but a diversified portfolio can bend it. When you spread your money properly among different asset types, a rise in some will offset a fall in others, muting your overall risk without a commensurate drop in return. It's the closest thing to a free lunch there is in investing. The make the alchemy work, you must load up on assets whose up and down cycles don't run in sync: stocks (both U.S. and foreign, as well as large-company and small), bonds (of varying maturities), cash, real estate and commodities.

It's The Portfolio, Stupid: Asset allocation...is the overwhelmingly dominant contributor to total return (Gary Brinson, Brian Singer and Gilbert Beebower). Most investors concentrate on trying to choose the best stock and pick the perfect moment to buy or sell. It's a waste. What really matters to your long-term returns is asset allocation - that is, how you split up your portfolio.

Since researchers dropped this bombshell 20 years ago, experts have debated the size of the asset-allocation factor. Some say it accounts for 40% of the variation in investors' returns; others (like the original researchers) say 90%. But no one refutes that it's major.

Don't Time The Market: The real key to making money in stocks is not to get scared out of them (Peter Lynch). It would be so nice to sell before every market downdraft and then get back in just as the good times roll again. But it's too hard to pull off. Nobody knows when markets will turn. And when they do, they tend to move in quick bursts. By the time you realize an advance has begun, most of it's over. Miss that initial stretch and you'll miss out on most of the gains. The lesson: The surest way to investing success is to buy, then stick to your guns.

Don't Follow The Crowd: Fashion is made to become unfashionable (Coco Chanel). Or, as the legendary financier Sir James Goldsmith has said, "If you see a bandwagon, it's too late." In the late 1990s, there was no more fashionable bandwagon for investors than Firsthand Technology Value fund. It returned 23.7% in 1998, but investors really piled into it after it rocketed an incredible 190.4% in 1999. But by then, the bust of 2000 was about to unfold, and Firsthand was soon to become as passe as plaid trousers. The result was a chilling example of the perils of following the herd: While the fund posted a respectable 16% annualized gain over the four years through 2001, the average shareholder in the fund actually lost more than 31.6% a year.

Keep Perspective: There is nothing new in the world except the history you do not know (Harry Truman). When the Dow sheds 300 points in a day, it's natural to feel doomed. And when the market surges, it's easy to be convinced that stocks have entered "a new paradigm," to echo a bubble-era phrase. Don't delude yourself. As Sir John Templeton notes, "The four most expensive words in the English language are, 'This time it's different,'" To keep your perspective, remember:

* In every bull market since 1970, stocks have dropped by 10% or more at least once. Average time to get back to even: 107 days.

* Over time, markets tend to stick close to their long-term trends, called "regression to the mean," Manias and panics never last.

Talk to Your Spouse: In every house of marriage there's room for an interpreter (Stanley Kunitz). Your most important financial partner isn't your broker. It's your spouse - you know, the one who probably owns half of all you do and whose fate is inextricably linked with yours. But research shows that spouses often don't agree on even such basic info as their income and savings. Wake-up call: To make smart decisions, you need to talk, and if you're like most couples, to do a better job at it.

* Men: Don't assume she doesn't care about this stuff. She does. But you need to lay off the jargon and speak English.

* Women: Don't just leave it all to him. At a minimum, know where the key papers are and how your money is invested.