How to set up your portfolio
If you're young and just starting out, begin investing in an index fund that mimics either the Standard & Poor's 500 or the Dow Jones Wilshire Total Stock Market Index. The latter fund covers a larger segment of the market (nearly 5,000 stocks). The historical returns for both indexes are similar because the S&P 500 constitutes roughly 80 percent of the Dow Jones Wilshire Index since both are weighted by market capitalization. You may also want to invest in a fixed-income fund to a much lesser degree to provide some stability to your portfolio.

If you've accumulated some assets and want to construct a portfolio using expert advice, check out the asset allocation chart in Bankrate's Retirement Guide. Use it as a basis to determine how your money should be allocated to the various asset classes according to your age group. Notice that the younger you are, the higher the allocation to domestic and foreign stock funds, with only 10 percent going to fixed income. As you get older, capital preservation becomes important, so you allocate more to fixed income.

Once you have the percentages straight, buy index funds representing the appropriate asset classes to fill out your chart. It's as easy as pie.

We provide a table of Vanguard index funds that can be used in your portfolio's construction. Of course, other fund firms offer index funds as well. Check out the ones at Fidelity Investments, T. Rowe Price, Charles Schwab or the discount brokerage where you may already have an account. Make sure you select funds with low costs (less than 0.3 percent) so the earnings and dividends of the corporations you own will benefit you rather than those ghoulish financial intermediaries.

Once you make your fund purchases, you can focus on other stuff going on in your life. After a year, rebalance if your assets go out of whack from their original allocations. That's really all there is to it. Not too mysterious, right?

Investing can be simple, not unlike buying a new sound system that requires you to spend some initial setup time. After that, you can sit back and enjoy the compounding returns.