With financial sector dragging the economy to a halt, govt. injecting billions of dollars in the economy and financial sectors, banks gone bankrupt, jobless claims on rise and the fear of sub-prime lending not yet over it could be quite daunting to even think of investing your hard earned money these days.

The billion dollars question is where you should put your money to get the best return? Should you buy financial stocks that have been beaten down after the crises began in Sept, 2008 or should you buy home builders stock? Should you buy commodities, metals or should you buy oil companies? What's the place to invest in these uncertain times?

My suggestion - just own the entire market. Well you would say that you can't do that because you don't have money to buy all the stocks of the market. Well my friend that's why sensible people on the wall street (Yeah there are sensible people on the wall street) created index funds.

Index funds like Vanguard - 500 Index Fund (VFINX) invests in stocks in the S&P 500 index. For people who don't know what's S&P 500 index it's Standard and Poor's measure of the stock prices of 500 largest companies of the USA. You can open your mutual fund account directly with Vanguard to avoid broker related charges. You can always buy such funds from your discount brokerage(Etrade, Sctottrades, Ameritrade etc.) too.

Vanguard also offers Total Stock Market Index Fund (VTSMX) that owns 3000 stocks representative of the whole US market.

If you buy one share of such mutual fund you own fraction of stocks of underlying companies.

A low cost index investing coupled with dollar cost averaging is the surefire way to invest and gain in a long term.

Nobody can predict how the market will behave tomorrow. You will do well with a disciplined approach towards investment and diversifying through index investing. This is a strategy for a long term. Considering the market condition I would say long term would easily mean 5 to 8 years.

If you are about to retire or if you will have to use your money pretty soon then CD and money market from banks ( NOT mutual fund money market) should be considered for your investments.

Let's see the S&P 500 index for last 3 years

It would have been impossible for you to guess all the dips and if you had tried your guess would have been as good as guess. That's why dollar cost averaging is the best way. You keep investing no matter if it's down or up. And over a long haul you will come out as winner.