Crafting a sensible strategy that's right for you is a lot easier than you might think —— if you just follow these commonsense moves.

　　Investing is starting to get interesting again. While the 9% gain for the S&P 500-stock index in 2004 may not look that exciting, it represents a 14% jump from where the benchmark was in mid-August and is a major improvement over the flat-to-down markets of the prior nine months of the year. Combined with the generally positive consensus outlook among investment strategists on Wall Street for 2005, the recent lift is enough to get investors calling their brokers again.

　　Indeed, Charles Schwab（SCH ）reported on Dec. 14 that trading volume was up 25% in November over October. On Dec. 30 the Investment Company Institute, a mutual-fund industry trade group, reported that investors poured a net $21 billion into stock funds in November, compared with $7 billion in net inflows in October. That may have been just the start.

　　The new year period is a great time to put some new money to work in the market——the fact that so many people often do so is one of the main reasons stocks tend to go up in January. But rather than rush headlong into the hot stock of the day, a more methodical approach is best. Whether it's for your 401（k）or your kids' college-savings program, here's a simple Five Step Plan for figuring out where to put your money in 2005:

　　Step 1: Forget about the market outlook. You read all those stories（including in BusinessWeek）forecasting the direction of the economy and quoting strategists on the exact level the S&P will reach by yearend? Now just ignore them. The problem with such forecasts is that they're only as good as the next six months —— if that —— so they aren't much help when it comes to implementing a longer-term investing strategy.

　　"Tilting a portfolio very strongly one way or another to try to capitalize on what an investor thinks is going to happen is much riskier than it sounds," says Scott Budde, a managing director at retirement specialists TIAA-CREF and a balanced-fund portfolio manager. That's because it's so easy for investors to then miss out on quick upside moves when the market turns —— like it has in the past three months, he points out.

　　The way the pros invest is to put most of their money into stocks（which have the best long-term returns of any asset class）and then minimize their risk by adding in other asset classes that are either really safe（like bonds or cash）or that tend to do well when stocks are doing poorly （like real estate or commodities）. "All roads lead to diversification," says Budde.

　　Step 2: Figure out what you already have. You may have four different mutual-fund accounts, a 401（k）plan at work, and three different brokerage accounts, each with their own broker calling you with advice.

　　Even if you don't consolidate your accounts（always a good idea）, at least make yourself a cheat sheet so you can see what you own and where it's invested. Come up with some rough percentages: How much money do you have in stocks, bonds, and cash? How much do you have in foreign stocks vs. domestic and small-caps vs. large?

　　Also include a category for any investments that might not be in a brokerage account, such as income-producing real estate, your childhood stamp collection, or the modern art hanging on your walls. All such assets go under the heading, "alternative investments."

　　Step 3: Now, come up with an asset-allocation plan. This Wall Street argot for deciding how to spread your money among stocks, bonds, and other asset classes sounds dull. But unlike most of what you hear from Wall Street, long-term, academically tested research lies behind recommendations for how to divvy up your funds.

　　The Web —— including virtually all online brokerage sites —— is loaded with tools to help you figure out your ideal asset allocation given your own risk tolerance and time horizon. For instance, here's a fairly conservative asset-allocation plan that's common for someone saving for retirement: 60% in stocks, 20% in fixed income, and 20% in cash.

　　For the fixed-income portion, Budde recommends a mix of corporate and government bonds and some exposure to Treasury Inflation-Protected Securities（TIPS）, which yield more if inflation rises. He also recommends that investors have about 10% exposure to income-producing real estate, which TIAA-CREF makes possible through a fund in its retirement accounts.

　　Commodities are another asset class investors are increasingly adding, since its returns don't correlate with those for stocks. Plus, several commodities mutual funds are now available. "People used to think diversification was adding more equity funds," says Budde. "Real diversification comes from adding these whole different asset classes."

　　Step 4: Diversify your stock holdings. About 90% of the advice you'll ever get about investing, concerns this one step. To boil it all down: Make sure you have a mix of large and small, international and domestic stocks. Of your stock funds, you could put 50% in large-caps, 20% in mid-caps, 10% in small-caps, and 20% in international, including a small percentage in emerging markets, for example, says Budde.

　　The easiest way cover your bases: Buy a stock fund that owns all the stocks in the Russell 3000 index and add a broadly diversified international fund, Budde recommends.

　　Many investors have neglected international investing in recent years. Now that the U.S. dollar is falling and foreign stock funds are outperforming domestic stocks, "make sure you have a full allocation to nondomestic securities," says Hayes Miller, head of global asset allocation in North America for Baring Asset Management.

　　In 2004 the benchmark international EAFE index（Europe, Australia, Asia, and the Far East）returned 21%, mainly due to the resurgence of China. Emerging-market funds have done even better, gaining 26% in 2004. "These tend to be very long cycles," says Miller, who thinks exposure to Asia will be especially important in the years to come. One strategy to consider: Use low-cost exchange-trade funds（ETFs）to invest in developed markets and then add an emerging-market fund to get access to developing markets, Miller suggests.

　　Step 5: Set aside some cash for trading —— if you must. Have the money to risk and think you can increase it by trading stocks? Go ahead. Just separate those funds from your long-term investments.

　　"History tends to smooth out market performance," says Joseph Battipaglia, chief investment officer at Ryan Beck & Co. "But there can be times when you can dramatically outperform the averages" by choosing the right stocks. The key, he says, is to set entrance and exit points and stick with those price targets.

　　It's easier said than done, of course. "You can try to trade if you're smart," says Patricia Van Kampen, chief equity officer at Mason Street Advisors. "But your chances of losing money are much greater if you don't do it right." Most individuals will do far better by diversifying their assets and sticking with a long-term plan.

　　Before the new year gets too far along and you fall back into those old undisciplined ways again, take a little time now to review these five steps and craft a broadly diversified approach that makes the most sense for you. Then no matter what the market does in 2005, at least you'll know you're giving it your smartest shot.