As you probably know, I have spent a lot of time in the investment advisory business. Not on the financial planning or brokerage side, but as a consultant to investment book and newsletter publishers. I’’ve also created, marketed, directed, and spoken at more than 100 investment seminars and conferences.

All that experience has taught me one important lesson: Most investors are gamblers. And gambling is crazy. Just the other day, a publisher I know got a letter from a little old (I imagine) lady advising him that she had just put $100,000 down on a stock one of his financial gurus had recommended. “It’’s not going up like he said it would,” she wrote. “

What should I do?” That’’s the kind of story that chills the spine. You don’’t like to admit it, but the advice business can be very dicey. Take a good bit of advice and place it in the wrong capsule and the result will be trouble. You know what I think about stock market investing: It’’s very difficult to do right. I have trouble predicting the profits of companies that I own – businesses that I know as well as I know my children – so how can I presume to know the future share price of someone else’s business? That said, I believe in the stock market.

Over the long haul, you should be able to make 9% on your money through a well-balanced portfolio. And if you find a good adviser and stick religiously to his system, you can do better than that. Of the hundreds of investment advisers that I know and have worked with, there are very few I could actually recommend to you. Not because they aren’’t (sometimes) very hot. Not because they aren’’t honest. (Some of them are honest to a fault.) And not because they don’’t know what they are doing.

It’’s just that, over the long run, I’’ve seen even the best of them blow hot and cold when it comes to picking stocks. So I have decided that you need more than a good stock tip – and certainly more than a good stock story. What you need is a simple system that allows you to do what all smart business people do:

Cut your losses short and let your profits run. To protect myself, here is what I do:

1. I spread my risk. I invest in two or three conservative portfolios.

2. I limit my investment. In total, my stock-market investments never exceed 20% of my net worth. (Right now, I’m at about 10%.) Admittedly, that’s very conservative. But my feeling is that I’d rather risk money on businesses I can (to some extent) control – like publishing and real estate – than on those I barely understand and have no influence on. Put it this way: I work hard for my money. I’m simply not willing to risk losing it just to get a higher return. Making 9% or 10% for me is plenty.

3. That said, I love to invest and I also love a good stock story. Since I know only fools buy stories, when I hear one that I simply can’’t resist, I limit my foolish impulse by restricting my investment in it to less than 1% of my invested net wealth. This last rule is important, so I’’ll elaborate. Say you are worth $2 million, half of which is tied up in your home and business. Your invested wealth – the money that you have in stocks, bonds, real estate, and the bank – amounts to $1 million. One percent of that is $10,000.

Tha’t’s the limit I’’m recommending for this financial situation. I’’ll recommend investment advisers to you when (a) they have a hot hand and/or (b) they have written something that I think makes a lot of sense. When I do, feel free to invest in their recommendations. But keep the investment small and your portfolio balanced. And cut your losses if a recommendation turns out badly. Do that, and neither you nor I will have to worry about you.