A true inflation hedge is something that goes up in value with higher inflation, like a house, or gold, or collectibles. But the fact is, inflation is the stock market's number one enemy. When inflation goes up, interest rates go up and two things happen. For one thing, investors say, "Golly, I can make all that money on high interest rate bonds, so why should I invest in stocks.

So they take their money out of the stock market, and stock prices go down. The second thing that happens is that the cost of doing business goes up. So, Corporate earnings go down, and stock prices go down.

Now why in the world would anybody say that stocks are a hedge against inflation It's because you can make money in stocks faster than inflation will eat it up. All you have to do is invest in stocks with high enough earnings growth rates. When you do that, the price of the stock will go up faster than inflation. And you will be whipping inflation by staying ahead of it.

There's an old adage that says the way to make money in the stock market is to buy low and sell high. That, of course, is an irrefutable truth. The only problem is that many investors confuse this nit of conventional wisdom with the assumption that if stock is going down in price it is low, and it is going up in price it is high. Consequently, they buy stocks on the way down and sell on the way up. There's hardly a worse thing an investor could do.

Stocks are bought on the expectation that they will go up in price. If a stock is going up in price, it is fulfilling that expectation. When the price is going down, it is denying that expectation. Therefore, it is logical to buy a stock when its price is going up.

Moreover, one of the best times to buy a stock is when the price has broken above an old high. At this point there are no unhappy holders who are waiting to dump the stock. If the stock is fairly valued, there should be cleared sailed ahead.

Of all the myths in the market, this may be the cruelest and the most foolish. Everyone knows that the elderly are not supposed to take risks. They must be very conservative because their earnings power is very limited. They can't afford to lose their money! Well, who decided that young people could afford to lose their money.

If any group needs to watch their money, it's young. They need every penny to start a family, buy a house, furniture, save for the future and on and on. Furthermore, young people (except for the Yuppies, maybe) are at the low end of the earnings scale. They have precious little disposable income. They cannot afford to speculate!

They also have an invaluable asset on their side. Time. They dont need to take risks. They can invest in the tried and true companies that make money year out. At 10% growth per year, their investments will double every seven years. By the time baby is off to college, that initial safe investment has increased by a factor of eight.

A woman recently said to me, "I'm just scared to death of stocks. I can't afford to lose my hard-earned money." The perception of high risk in stock investing is not totally without merit. Many investors have lost substantial sums of money in the market. Visions of investors jumping out of window back in 1929 are graphic reminders of the risk inherent in stock investing.

Recent events on the market, the Great Crash of '87, the Friday the 13th Mini-meltdown, the ills of Program Trading, insider trading, leveraged buy-outs, etc., have also contributed to the casino image associated with stock investing. To a large degree, the investment community is their own worst enemy in scaring off the individual investor.

That is very unfortunate because stock investing is one of the best avenues the average person has of has of accumulating substantial wealth. And it really doesn't have to be very risky.

Here's how to make good money in stocks with low risk:

1. Buy stocks with consistent, predictable earnings growth. Buy stocks with earnings growth rates of at least equal to the sum of current inflation and interest rates.

2. Diversify.

• Do not put more than 10% of your money into any single stock.

• Do not own more than 2 stocks in the same industry.

3. Do not plunge into the market. Spread your investments over time.

4. Use Stop-Sell orders to limit risk.

Stocks with consistent, predictable earnings growth are the safest stocks you can buy. They represent the best managed companies in America.

A stock portfolio with an average earnings growth rate of at least 14%/yr. has a high probability of doubling in five years. In twenty years, it will have increased by 1,500 percent.

If you bought 10 stocks, and limited your loss on any single stock to 10% by using Stop-Sell orders, your total portfolio risk is only 10%. Your risk on any single stock is only 1% of your total portfolio. How many investments can you think of that have the upside potential of stocks with such limited risk exposure