Investors who have held McDonald's for a long time are certainly glad they did. One hundred shares bought at $22.50 on the IPO in 1965 are worth more than $16.6 million today. (In addition, you would be receiving a quarterly dividend that amounts to over $383,000 a year.) And this is just McDonald's, not some cutting-edge genetics company. Volatility is simply the price of admission for stock investors. If you could own a passbook savings account that gave equity-like returns, everyone would do it. But you can't. You have to own stocks. There are less risky ways to do this, however. For example, value stocks - companies that are inexpensive relative to their sales, earnings and book value - are less volatile than growth stocks. Large companies - with a market capitalization of $10 billion or more - are less volatile than small and midsized companies. And domestic stocks are less volatile than foreign stocks. (That's partly because foreign stocks are generally denominated in other currencies.) There is also less risk when you diversify broadly. Owning 50 stocks, for example, is less risky than owning five stocks. If you wanted to cut your stock market risk, you might invest in domestic, large cap value stocks. But - counterintuitive as it may seem - it is actually less risky to divide your portfolio among large caps and small caps, growth stocks and value stocks, and foreign companies and domestic companies. This is called asset allocation. The father of it - Harry Markowitz - won the Nobel Prize in economics for conclusively showing that blending riskier assets together in your portfolio leads to higher returns with less risk, not more. Higher returns with less risk is the holy grail of investing. And if you want to make your portfolio more conservative still, you can add government and corporate bonds with long- and short-term maturities, Treasury Inflation-Protected Securities (TIPS), real estate investment trusts, and even gold shares. In fact, The Oxford Club recommends just that. Here is our asset allocation model. This is what intelligent risk-taking looks like. It's the way serious investors handle their serious money in a serious way. And it works. A $100,000 investment in 2003 in our Gone Fishin' Portfolio - which uses Vanguard mutual funds to implement this asset allocation strategy - was worth over $468,000 at the end of last year. You can read more about that here. (The latest edition of my Gone Fishin' Portfolio book is now available for pre-order on Amazon, but click here to learn how you can get a copy right now.) In short, there are conservative ways to take advantage of stock market opportunities. And there are other more aggressive strategies for earning higher returns. Good investing, Alex P.S. I recently sat down with journalist - and longtime subscriber - Bill O'Reilly to discuss one such wealth-building strategy. In short, investors are set up to take advantage of amazing new innovations over the next two years. Check out our interview here to learn more. | 
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